IBM’s big black and blue 1992

On January 19, 1993, IBM announced a stunning $5 billion loss for fiscal year 1992, earning the unfortunate nickname of “Big Black and Blue” until its turnaround later in the decade.

John Akers’ ouster as IBM CEO

The loss led to sweeping changes at IBM. A week later, IBM forced CEO John Akers to resign. Akers had restructured IBM with the intention of creating autonomous units it could spin off as “baby blues,” inspired by AT&T’s forced divestiture of its baby bells in 1984. The reason printer manufacturer Lexmark exists is due to one of these spinoffs. In 1991, IBM spun off its keyboard and printer manufacturing into the company that became Lexmark. Akers also downsized IBM’s workforce by about 47,000, causing a loss of morale.

IBM’s turnaround artist

To find a successor, IBM looked outside the company. Apple’s John Sculley, Motorola chairman George Fisher, and Bill Gates of Microsoft were not interested. Other rumored candidates included Eckhard Pfeiffer of Compaq and Scott McNealy of Sun Microsystems. Unable to attract someone from within the computer industry, IBM hired Lou Gerstner from RJR Nabisco in April 1993. Gerstner had never worked in technology before, but his brother had previously led IBM’s PC division until 1989.

Gerstner halted Akers’ plan to split IBM into multiple business units, instead choosing to rely on IBM’s ability to deliver complete IT solutions to customers, including hardware, software, and service. IBM still made divestments, but shifted to selling individual lines of business rather than spinning off entire units as autonomous “baby blues.” One well publicized example is IBM’s sale of its hard drive business in 2002 to Hitachi.

Gerstner instituted layoffs for the first two years of his tenure, but saved the company. From 1993 to Gerstner’s retirement in 2002, IBM’s market capitalization rose from $29 billion to $168 billion, shedding the big black and blue nickname for good.

Gerstner also pursued acquisitions, including its 1995 acquisition of Lotus Development Corp. and its 1996 acquisition of Tivoli Systems Inc.

The biggest knock on Gerstner is that IBM lost its position as a top PC maker during his tenure, ultimately resulting in the sale of its PC business to Lenovo in 2006. Even still, there is little doubt Gerstner remade IBM into something better than what Akers would have done during the same timeframe.

Dave Farquhar

David Farquhar is a computer security professional, entrepreneur, and author. He has written professionally about computers since 1991, so he was writing about retro computers when they were still new. He has been working in IT professionally since 1994 and has specialized in vulnerability management since 2013. He holds Security+ and CISSP certifications. Today he blogs five times a week, mostly about retro computers and retro gaming covering the time period from 1975 to 2000.