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IBM: Best in Class

Stocks in this article: IBM

ARMONK, N.Y. ( TheStreet) -- IBM (IBM) CEO Sam Palmisano may not be a rock-star executive in the mold of Apple's (AAPL) Steve Jobs or Microsoft's (MSFT) Steve Ballmer, but he has been earning applause for successfully guiding the tech giant through the economic downturn.

The Armonk, N.Y.-based firm has been one of the success stories of the recession. Margins have fattened despite falling revenue, as Palmisano has zeroed in on fertile parts of the company. The 58-year-old, who played backup sax for the Temptations when he was in high school, now is leading the band at IBM.

"When you think of large technology companies and who has navigated the storm best, I think that IBM has got to be at the top of the list," Brian Marshall, an analyst at Broadpoint AmTech, told TheStreet. "They have done a great job of executing their business plan."

Inside IBM's Tech Vision




Palmisano, a 36-year IBM veteran who succeeded Lou Gerstner as CEO in 2003, has done a good job of building on his predecessor's work. In the last six years, Palmisano has shifted IBM's focus further from its hardware roots into higher-margin businesses such as services and software.

"They have done a great job of expanding the operating margin," said Marshall, adding that this is expected to grow to 18.5% in 2009 from 16.1% last year. "I think they have the right plan and they are executing very well."

Ron Gruia, principal analyst at Frost & Sullivan, agrees, citing Palmisano's recent crusade to control expenses.

"In this market, there's a few key elements for success -- one is managing your OPEX aggressively, and he has done that with cost cuts," he told TheStreet. "Overall, if you look at IBM throughout his tenure, they have undergone a big transformation -- they became more of a services company."


Which tech CEO has led best during the recession?

Sam Palmisano -- IBM
Mark Hurd -- Hewlett-Packard
Michael Dell -- Dell
Larry Ellison -- Oracle
John Chambers -- Cisco
Steve Jobs -- Apple
Steve Ballmer -- Microsoft
Joe Tucci -- EMC
Carol Bartz -- Yahoo!
Eric Schmidt -- Google

1 of 3

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