New IBM CEO Says Company Poised For Next Net Boom

"This is IBM's franchise. The opportunity that results from this industry shift is ours to lose," an upbeat Samuel J. Palmisano said Tuesday to about 400 investors gathered for the company's annual meeting in Louisville, Ky.

IBM was widely chided for having missed the Internet boom in the late 1990s, an assertion that the company later turned around and used to its advantage, when the dot-com bubble burst.

Palmisano says IBM's deft use of security technology, networking and its giant services arm were the right tools for the new wave of emerging Internet devices.

IBM also increased its quarterly dividend by a penny, to 15 cents a share, and boosted its stock repurchase authorization by $3.5 billion.

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The shareholders meeting signaled the leadership transition at Big Blue. IBM chairman Louis V. Gerstner presided, but it was Palmisano, his successor as CEO, who outlined business strategy.

The retiring Gerstner, who will remain IBM chairman through the end of 2002, says he does not intend to remain on the company's board after his retirement.

Shareholders overwhelmingly defeated four proposals opposed by IBM. One attempted to alter accounting practices to prevent IBM executives from reaping extra pay for earnings made by pension funds. The company has long been dogged by critics who say IBM's reporting of pension fund gains improperly inflates the company's earnings.

"I believe IBM executives should be paid for performance that results in real profit and builds the company," says retired IBM worker Donald Parry of Jacksonville, Fla., who presented the proposal. "They should not be paid a bonus for 'vapor profit' arising from a pension fund accounting rule that does not provide any actual profit for the company."

Gerstner responded that the accounting change, which received 17 percent of votes in its favor, could result in the pension plan being underfunded.

IBM had sufficient cash flow last year to invest $5.8 billion in research and development and $5.7 billion in capital expenditures, Palmisano says. IBM was awarded more than 3,000 U.S. patents last year.

IBM stock was down 13 cents, to close at $83.76, in trading Tuesday on the New York Stock Exchange, but gained 8 cents in extended trading.

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