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The Problem With Remetty

|Includes:International Business Machines Corporation (IBM)

I applaud the fact that incoming IBM CEO Virginia Remetty is female.

But I do have to question the fact she's being promoted from “senior vice president and group executive for sales, marketing and strategy.”

The reason I worry about that is that she's the kind of get along, go along hire that has gotten IBM into trouble in the past. People like John Opel, Frank Cary and John Akers,  good people who made their careers at IBM, who understood its corporate culture and reveled in it.

When your focus is on marketing, you can often lose strategic sense. When your focus is internal, you can easily miss opportunities, and the need to constantly reinvent a company if it's to thrive. The line of IBM chairs I just cited were all blind to the threat of the PC. They made the company vulnerable to the first kid with a clue who came along. They got suckered by Bill Gates, and it's taken decades to get the market cap lead back.

The most notable decision Remetty is credited with, in IBM's own press release, is the integration of PriceWaterhouseCoopers into the organization. That's a purchase that was made almost a decade ago. No offense, but what have you done for me lately?

We're told that Ms. Remetty cares about “the cloud.” Who doesn't? What about it? How are you to keep IBM growing in an era when more-and-more corporate data is moving to an architecture that saves them vast sums over buying, say, IBM mainframes?

And that's the elephant in the room. IBM doesn't like to admit this, calling itself a “global services company,” but its profits still come from mainframes, from big iron, and while those profits are still rising the cloud has to ask, how long?

The whole idea of the cloud is that you can, with a collection of ordinary PC-type parts, build capacity greater than any multi-million dollar mainframe. Sure, IBM retains its customer control in the mainframe space, but as the gap between mainframe and cloud costs continues to grow, how long can that continue?

These are not marketing questions. These are strategic questions. These are questions that call for dramatic reinvention. You take a nice marketing person from inside and you're hiding from those questions.

I'm hoping to be pleasantly surprised starting in January, but I'm keeping my powder dry and unless these questions are addressed I'm heading for the exits.



Disclosure: I am long IBM.

Additional disclosure: My IRA bought 100 shares back in 2005.
Stocks: IBM