IBM shows tech industry how to make a CEO transition

With shares near all-time high and earnings healthy, Palmisano chooses his successor

Coming so soon after the clown-show spectacles of HP and Yahoo dumping their CEOs in a belated panic, IBM's announcement Tuesday that chief executive Sam Palmisano will retire and be replaced by a highly regarded executive he has been grooming for the job seems refreshingly normal.

This is what a leadership transition should look like. This is how it should be done.

While much will be made about a woman being placed in charge of a tech company as large as Big Blue, the real story behind Virginia Rometty's ascension to the top spot is that of a well-run organization which effectively plans ahead and rewards talent and effectiveness above all.

Granted, that formula doesn't do much for bloggers and other industry observers seeking perpetual entertainment from the dysfunctional denizens of Silicon Valley. There are no stories coming out of White Plains about temper tantrums, board backstabbing, employee slapping, fingerpointing, talent exoduses, Peanut Butter manifestos and affairs with part-time actresses. IBM doesn't roll that way, much to the relief of shareholders.

We're not hearing doubts and unsettling comments from analysts and customers about Rometty, a 30-year veteran of IBM who will take over on Jan. 1 from Palmisano, who will remain as chairman of the company.

That's because Rometty, currently IBM's senior vice president and group executive for sales, marketing and strategy, is a proven commodity with a track record of success.

"Ginni Rometty has successfully led several of IBM's most important businesses over the past decade -- from the formation of IBM Global Business Services to the build-out of our Growth Markets Unit," Palmisano said in a statement. "With every leadership role, she has strengthened our ability to integrate IBM's capabilities for our clients."

It was Rometty's job overseeing the integration of PriceWaterhouseCoopers Consulting into IBM in 2002 that put her on the short list of potential CEOs. The purchase was intended to help transition Big Blue from a pure seller of technology to a tech consulting leader.

But buying a business fundamentally different than your own is a lot easier than effectively integrating it. Just ask anyone who was involved in the merger of Time Warner and AOL. But Rometty pulled it off.

She was rewarded two years ago with a promotion that put her in charge of IBM's marketing and strategy.

Rometty intends to pursue a "steady as she goes" strategy with IBM, and why not? Company shares are near an all-time high, earnings are healthy, and Big Blue under Palmisano has effectively (so far) made the transition from a seller of mainframes and PCs into a technology services and business software provider well-positioned for a future of mobile and cloud computing. (My condolences, HP shareholders.)

Now Rometty just has to execute. I wish her well.

Shares of IBM (NYSE: IBM) were up 96 cents, or 0.53%, to 181.32 in early Wednesday trading.

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