August 1, 2003 10:52 AM PDT

IBM to shift executives

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IBM is shifting the roles of two of its business unit executives.

The company will move Michel Mayer, former general manager of IBM Microelectronics, and Mark Elliott, former general manager of IBM Europe, Middle East and Africa, into new roles.

The changes follow on IBM's second-quarter results. Analysts saw the numbers as solid overall, but chips, along with sales in Elliott's domain, were two of Big Blue's weakest areas.

Despite a major effort to reorganize and stem losses at the Technology Group, which includes IBM Microelectronics, the company's revenue declined by 34 percent year over year to $659 million. Big Blue also saw a wider-than-expected loss of $111 million during the quarter.

IBM CFO John Joyce labeled the Technology Group's performance "unsatisfactory" during the company's second-quarter earnings call. He also cited Europe, the Middle East and Africa as an area of relative weakness for Big Blue's hardware and services.

IBM representatives said the moves were unrelated to its financials and that no other moves should be expected in the near future. Executives at the company shift posts often, usually every couple of years, one representative said.

Mayer, who had been general manager at the microelectronics unit for 22 months, will take on a still-to-be-disclosed role. Elliott will return to the United States to run IBM's Global Independent Software Vendor Partner Program, a company representative in Europe said.

John Kelly, group executive for the IBM Technology Group, will handle daily operations at the microelectronics unit, while Hans Ulrich Maerki, chairman of IBM Europe, Middle East and Africa, will become general manager of the group, IBM said.

The microelectronics division will continue a strategy that was established under Mayer. Mayer helped shift the unit from being purely a chip manufacturer toward its focus on delivering services for chip design, testing and manufacturing.

The centerpiece of the unit's new strategy, a chip-fabrication plant that recently opened in East Fishkill, N.Y., was also the source of some of IBM's problems. Difficulties in starting up the fabricating conspired with the uncertain economy to negatively affect the Technology Group's results.

"Yields from our 300-millimeter line during the start-up were low, resulting in higher costs," Joyce said during IBM's second-quarter earnings conference call. "Our yields improved during the quarter, and I expect this to be less of an impact going forward."

Some customers also pushed out orders, awaiting an economic recovery. Because of that and the fab's low initial yields, the Technology Group is not expected to break even this year, Joyce said.

Meanwhile, revenue from Europe, the Middle East and Africa rose by 3 percent on a year-over-year basis but lagged behind growth in the Americas, which was 7 percent, and growth in the Asia-Pacific region, which was 5 percent, IBM said.

 

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