IBM transformation under Lou Gerstner (1993-1996)
IBM lost about $16 billion across 1991-1993 as mainframe sales collapsed. Lou Gerstner, hired as CEO in April 1993, cut roughly 60,000 jobs while redirecting investment from hardware toward services and software. The workforce fell from 374,000 in 1990 to 220,000 by 1994.
IBM returned to profitability in 1994. The stock recovered from about $40 in early 1993 to over $100 by 1996.
Services became more than half of IBM revenue by 2000. The pivot is taught in business schools as the model for legacy tech transformation.
Like Meta now, IBM cut workers from a business model under threat to fund a bet on the next platform. The cuts worked because the bet did. Meta is making a much larger capital bet on AI.
