Obituary: Louis Gerstner Jr. Transformed a Hidebound IBM

“LOUIS GERSTNER JR.

 

1942-2025

 

Louis V. Gerstner Jr., who as the first outsider to head International Business Machines steered the company away from what looked like a possible demise and refocused it on services, reducing reliance on hardware, died on Saturday.

 

He was 83 years old.

 

IBM, which announced his death, didn't disclose the cause.

 

On his first day as CEO in 1993, Gerstner noticed that all the men in executive suites wore white shirts, as they had been doing for decades. Gerstner's shirt was blue, perhaps appropriate for a company nicknamed Big Blue. His shirt "made clear that he was declaring war on ossification," said Paul Carroll, a former Wall Street Journal reporter and author of "Big Blues: The Unmaking of IBM," a history of the situation that Gerstner inherited.

 

Almost immediately after his arrival, IBM lifers began wearing colorful dress shirts -- and watching their backs.

 

IBM's headquarters reminded Gerstner of a giant government bureaucracy. He was surprised to find no computer in the CEO's office.

 

The hidebound company, overly reliant on mainframe computers, had been out-hustled by nimbler makers of desktop computers and software. IBM had eliminated more than 100,000 jobs and was in the process of reporting a second consecutive year of losses exceeding $6 billion. Many consultants were calling for a breakup of the company.

 

Gerstner decided to hold IBM together and to help customers set up and manage computer systems that didn't need to involve only Big Blue's equipment and software. He announced another 35,000 job cuts and thoroughly shook up management.

 

Managers were ordered to stop spending weeks preparing elaborate slideshows for unproductive talkfests.

 

"The last thing IBM needs now is a vision," he said four months after arriving. "What IBM needs right now is a series of very tough-minded, market-driven, highly effective strategies in each of its businesses."

 

About a year after Gerstner's arrival, Nicholas Donofrio, the head of IBM's mainframe division, was on stage pitching to corporate customers at a conference. Gerstner showed up unexpectedly and asked Donofrio if he could interrupt. "Of course, Lou, you can do anything you want," Donofrio responded. "Would you like me to turn and face the corner?"

 

Gerstner said that wasn't necessary, then told the customers that if they didn't get the service they needed, "you let me know."

 

He jumped on opportunities to sell services and gear needed by companies racing to adapt to the internet age, such as computer servers, data-storage devices and database software.

 

Helped by stock buybacks, IBM's share price rose by more than ninefold between his arrival in April 1993 and early June 2001; over the same period, the S&P 500 rose less than threefold.

 

Though he generally got strong reviews for leading IBM from 1993 through 2002, some analysts said Gerstner overpaid for the $3.5 billion acquisition of software developer Lotus Development in 1995.

 

Gerstner's survivors include his wife, Robin; a daughter, Elizabeth; and grandchildren. His philanthropy included large donations to programs aimed at homelessness.

 

Louis Vincent Gerstner Jr., the second of four sons, was born March 1, 1942, in Mineola, on New York's Long Island. He and his brothers attended a Roman Catholic high school. "My parents remortgaged their house every four years to pay for schooling," Gerstner wrote in a memoir, "Who Says Elephants Can't Dance?"

 

He won a scholarship at Dartmouth College, where he majored in engineering. Gerstner then earned an M.B.A. degree at Harvard Business School in 1965 and joined the McKinsey consulting firm, where he soon became one of the youngest partners and eventually headed the finance practice.

 

After nine years at McKinsey, he was recruited to American Express, where he initially headed travel-related services, including the credit-card and traveler's check businesses, and later was president of the company.

 

In 1989, headhunters called again, and he accepted the job of chairman and CEO at RJR Nabisco, which was acquired by Kohlberg Kravis Roberts in a deal that loaded the company up with debt. Gerstner had to scramble to cut costs. He found himself in the middle of a cigarette price war, hurting RJR's high-price Winston and Salem brands. He oversaw an aggressive move into low-price cigarettes, including packs selling for as little as 69 cents at filling stations.

 

Survival in that brutal environment put him on IBM's shortlist after John F. Akers resigned from the top job under pressure in January 1993.

 

After leaving IBM in 2002, Gerstner became chairman of the Carlyle Group, which then managed $13.5 billion in investments for institutions and wealthy clients.

 

One irony of Gerstner's career was that he won the top IBM job that at one time seemed within the grasp of his older brother, Richard, who was a rising star at the company until Lyme disease sidelined him. In his book, Lou Gerstner thanked his brother for giving him the most insightful briefing he received in his early days at IBM. That advice included "find a private cadre of advisers who have no axes to grind" and "call your mom."” [1]

 

1. Business News -- Obituary: Louis Gerstner Jr. Transformed a Hidebound IBM. Hagerty, James R.  Wall Street Journal, Eastern edition; New York, N.Y.. 30 Dec 2025: B3.