IBM CEO Sam Palmisano: We are going to weather the storm

LOS ANGELES--Following renditions of "Goldfinger," "Mission Impossible" and "Star Wars" and other movie inspired themes, IBM CEO Sam Palmisano took the stage at the Nokia Theatre here to address 1,000 of the company's top business partners.

Regarding the current economic climate, Palmisano, who is also IBM's chairman and president, told his business partners, "We are going to weather the storm and come through it stronger than most. Just like IBM had to rethink its business model, you have to pick the segments of space and prioritize the opportunities. We have to invest and we have to invest together."

IBM chief Sam Palmisano

(Credit: Dan Farber)

So far, it appears IBM is doing exactly that. The company blew through first quarter earnings expectations with $1.65 per share earnings on revenue of $24.5 billion.

Palmisano took over as IBM's CEO in 2002 after serving as president and COO under Lou Gerstner. He commands an army of 386,558 employees generating nearly $100 billion in annual revenue. During his 35-year tenure at IBM, Palmisano has run business units such as IBM Global Services and Personal Systems and the Enterprise Systems groups.

In his remarks, Palmisano also dropped broad hints that IBM would provide a marketplace for applications using Google-like technical infrastructure. "Through collaborating together, we could create an application marketplace with business partners, with some applications in the cloud or some on premises," he said.

He described how the world is changing, requiring different kind of investments. "If you have expertise, capabilities and can innovate, you are of value in this world. If you don't, you have a strategic issue to work on," Palmisano said.

The so-called mid-market, with a million potential clients and $500 billion in revenue, is a key new target for IBM. Palmisano argued that smaller business need help and providing the right-sized solution that solves problems is a big opportunity. IBM has stepped up its focus on the mid-market with vertical solutions in 120 sub-industries and in 20 countries, he said.

Much of IBM's business is focused on the data center. "We have to solve problems end-to-end in a holistic way. Clouds have a role in the enterprise, many times behind the firewall because of issues of security and protection of information," Palmisano said. "Virtualization is key, but don't dumb down the problem. If the answer is to take four Intel servers down to one, they will ask you to take your PowerPoint and go home. The problem is more complex. We have to work together and help out."

"We are pretty well positioned," Palmisano told the crowd of partners. "We are at a point in time where we will have to make some investments and commitments to each other. You have to do self assessment of skill sets, of our people and your people."

He concluded, as you would expect, that IBM is a better bet for its partners. "When you are old, you are disciplined. You've seen it all before and you re-prioritize investments and go for share because you have the balance sheet," he said.