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IBM 'back on track': CEO
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May 9, 2000: 8:09 p.m. ET
Gerstner says Y2K problems resolved, is optimistic about remainder of year
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NEW YORK (CNNfn) - IBM Chairman and Chief Executive Lou Gerstner on Tuesday shrugged off analysts concerns about sluggish revenue growth at the world's biggest computer company, saying that IBM's core businesses are "back on track" after the Y2K computer bug slowed sales and weighed on its stock price.
Gerstner, the top executive of Armonk, N.Y.-based IBM, told analysts that the gray clouds caused by factors such as the Y2K bug, which bruised IBM late in 1999 and early this year as customers trimmed spending to confront it, have dissipated. The outlook for the remainder of the year is sunny, thanks in part to restructuring, and a focus on 'e-business.'
 "Y2K continued to hurt us, but that's over now," Gerstner said. "We're putting it behind us and we are getting our businesses back on track."
Gerstner reassured investors that the $87 billion hardware, software and Internet products provider would return to a stable pattern of revenue growth, but noted that that while the company occasionally displays an ability to deliver high growth, it firmly plans to stick to its strategy.
"A model that fits a smaller company ... won't be right for us," he said." We love revenue growth. But our model remains high single-digit revenue growth, and low double-digit earnings growth, and we like it," he said. "We think the soundness and stability of this enterprise fits with that kind of a model."
"We are well aware (of expectations) that all of this portfolio restructuring should lead to higher revenue growth overall. Let me assure you that is our expectation, and we intend to produce much better results as we move into the second half," he declared.
Gerstner, who only speaks to analysts once every year, outlined a strategy of cutting costs, and moving forward by providing the hardware, software and services to help businesses move their operations online.
 "Over the past 12 month we have made a series of strategic decisions that have affected short term revenue, but will yield and are already yielding a more profitable portfolio," Gerstner said.
The actions include selling its network business to AT&T, reducing its exposure to the DRAM memory market, and undertaking a restructuring in its personal computer sales business.
He noted the restructuring and other operations issues caused IBM to suffer a $1 billion first-quarter revenue shortfall. At least one Wall Street analyst pegged that that shortfall as high as $1.8 billion.
Gerstner's discussion mapped out IBM's plans for several sectors including servers, software, services and Internet businesses, such as building and managing corporate Web sites and e-commerce systems.
 But he said was still troubled by the commercial desktop portion of IBM's PC business.
"We haven't proven to ourselves that we can make money in it, on a consistent basis," he said. 
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