Krowe to Leave IBM for Texaco : Computer Giant Announces $2-Billion Stock Buyback
IBM’s fourth-highest-ranking official, Executive Vice President Allen J. Krowe, said Tuesday that he is taking early retirement at age 56 to become senior vice president and chief financial officer of Texaco Inc.
The giant computer company also announced that it authorized repurchasing of up to $2 billion of its common stock.
Krowe, a 28-year veteran, cited in an interview IBM’s mandatory retirement age of 60 and his own desire to work “into the mid-1990s” for his decision to embrace the “ideal opportunity” that Texaco offered. John F. Akers, IBM’s chairman and chief executive, said in a prepared statement that “IBM would have been well served had Allen Krowe decided to stay with the company.”
But several industry observers contended that Krowe’s star at IBM has been falling in recent years. Krowe was widely blamed for pushing IBM to gear up for large revenue gains that never materialized.
“He is a savvy, aggressive guy, but he was kind of embarrassed by some of the projections that he made,” said John J. McManus, an analyst at Thomson McKinnon Securities in New York. “The finance department made too many bad forecasts,” added David Wu, an analyst with S. G. Warburg in New York.
Still, Krowe was elected to IBM’s board in 1986 and earlier this year was named review executive to provide guidance for about half of IBM’s product line.
His portfolio since then included communications products, mid-range computer systems and personal systems--an area in which IBM has been much criticized for abandoning its old personal computer architecture last year in favor of the new Personal System/2. Earlier this month, nine PC makers banded together to announce that they will challenge IBM’s attempt to set new standards with the PS/2.
Any suggestion that Krowe is leaving because of displeasure with the PS/2 is “totally unfair,” an IBM spokesman said. “We are satisfied with the PS/2’s progress,” he asserted, adding that market share slippage in the low end of the personal computer market has been mirrored by gains in more powerful models.
As a member of IBM’s six-member corporate management board, Krowe received cash compensation of $557,408 last year and was awarded 1,542 shares of IBM stock worth an additional $172,000 at current prices. He refused to disclose his new salary package but called it “very satisfactory.”
Upon joining Texaco on Oct. 1, Krowe will replace Richard Brinkman, who as the oil company’s chief financial officer was a chief architect of its restructuring following bankruptcy court proceedings. Brinkman is taking early retirement. The company gave no hint of disappointment or problems in the restructuring that could be linked to Brinkman’s departure.
The stock repurchase authorized by IBM’s board would allow the company to buy back about 3% of its shares outstanding at current prices. On Tuesday, IBM’s stock closed at $113.25, off $1, on the New York Stock Exchange.
“IBM is finally becoming an attractive investment vehicle, and obviously IBM agrees,” noted John Jones, an analyst with Montgomery Securities in San Francisco, who cited strength in mid-range and mainframe computer systems. Actually, IBM has been buying back stock since May, 1986, having spent a total of $3.5 billion to repurchase 28 million shares since then.
IBM, which has 592,010,108 shares outstanding, said the repurchase represented “a good long-term investment on behalf of our shareholders and will have a positive effect on earnings per share and return on equity.” The shares will be purchased in blocks of at least 5,000 shares, but the board set no schedule for the buyback.
Although no successor to Krowe was named, IBM did appoint two new members to its board: John Brooks Slaughter, president of Occidental College in Eagle Rock, and Edgar S. Woolard Jr., president and chief operating officer of Du Pont Co.
Finally, IBM enhanced some functions and reduced prices of data-storage products for its big mainframe computers by 12% to 17%. Analysts called the move overdue.
