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Rometty’s IBM Smells Just as Sweet

Dana Blankenhorn|Contributor
Virginia 'Ginni' Rometty
Andrew Harrer | Bloomberg | Getty Images

It has now been about six months since Virginia Rometty took the helm of International Business Machines.

She is now the most influential tech executive on the planet, as noted in an April Time piece by Marisa Mayer, now CEO of Yahoo.

You probably wont read much about the anniversary. I think that’s intentional. Rometty’s IBM is very, very quiet. Or as the philosopher Elmer Fudd would say, “vewy, vewy” quiet.

One anecdote tells the story.

It has long been a tradition that the CEO of IBM is a member of the Augusta National Golf Club. They are a huge sponsor of the Masters. This, and Rometty’s gender, were mentioned around the time of this year’s tournament, which she attended wearing a pink jacket, as USA Today noted.

The jacket was the statement. Rometty said nothing.

When Augusta announced its first female members this week, she wasn’t on the list. My guess is her name will be added, quietly, and it will barely cause a ripple. (Read More: Augusta National Adds First Two Female Members.)

That’s how Rometty wants it. It’s how her predecessor, Sam Palmisano, acted, and Rometty is a Palmisano protege. She’s about marketing, about relationships, about helping big enterprises understand that when they hire IBM, things will get done. Quietly, efficiently, no muss and no fuss. No drama.

This is how it was under Palmisano, as well. Enterprise management was a big deal in the last decade, and IBM bought Tivoli Systems years before it became such. Computer security is a big deal today, and IBM bought ISS, a leader in tracking down problems in real-time, a decade ago.

This is Rometty’s IBM. Anticipate needs, get there before the crowd, and when your customer calls with the question, have the answer ready for them.

Consider Rometty’s latest acquisition. Texas Memory Systems makes sub-systems out of flash memory chips.

You first saw flash in “memory sticks,” replacing floppy drives. Recently they replaced hard drives in PCs. Now the technology is about to head into the clouds, because it’s faster and more reliable. That means huge demand, fat margins, a perfect market for IBM.

When prices make it competitive, or when customers come looking for it, IBM will have it for them. IBM’s first CEO, Thomas Watson Sr., had a big sign over his desk reading “THINK.” Rometty’s sign might read “THOUGHT.”

IBM was the first big computer company to go heavily into services, under Lou Gerstner. Hewlett-Packard tried to copy that strategy by buying EDS, and Dell later bought Perot Systems. Neither has made a dent in IBM’s lead, and HP just wrote off most of its EDS investment.

IBM’s revenue is increasingly coming from the developing world, and its headcounts are following. Fewer U.S.-based employees, more employees closer to customers. You think having a major lab in Nairobi, as Reuters reports, won’t bring in African customers? Then consider the impact on costs, and profit margins.

Rometty also knows when to let go. IBM quietly sold its “retail store” business (read cash registers) to Toshiba this month, Reuters reports. The money is in the processing anyway, and you know what kind of machine you need for processing credit card transactions? Mainframes. IBM still has a monopoly there.

I will admit that I was skeptical when Rometty was announced as Palmisano’s successor last year. I saw her as a nice marketing person, and Palmisano in the same light.

I was wrong.

It is very, very hard to make a big company bigger, especially if you’re mainly a business-to-business company. IBM has more than recovered from the damage done by the great recession (explain this), with operating margins that are now close to 20 percent.

Let Silicon Valley have the headlines. Virginia Rometty’s IBM will cash the checks.

—By Contributor Dana Blankenhorn

Additional Views: Is Wall Street Ignoring Risk at IBM?: Greenberg


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At the time of publication, Dana Blankenhorn was long IBM.