Saving Big Blue.

• Author: STEWART III, G. BENNETT
• Position: Review

Published by McGraw-Hill, New York, 309 pages, $24.95

IN 1992, IBM CORP. lost almost $5 billion, the biggest blow ever suffered up until then by an American company. Once the undisputed leader of the world's fastest-growing and most important industry, IBM had become so sickly that many analysts figured its only chance for survival was dismemberment into a cluster of smaller, more nimble units. With demand for its mainframes crumbling, IBM was completely disoriented. CEO John Akers was about to administer the bitter breakup pill when the board called for a second opinion.

In most un-IBM fashion, directors responded to the company's flagging heartbeat and the growing pressure of activist shareholders by firing Akers. Its plaintive search for a new surgeon general yielded no takers from many eminent business leaders, including the world's future wealthiest human, Bill Gates. Was no one willing to take up the greatest turnaround challenge in the history of business?

Into this ER setting stepped Lou Gerstner, a former McKinsey & Co. consultant with a burgeoning reputation for corporate revivals, first at American Express Co. and then at RJR Nabisco, where he ran the largest LBO in America. A man apparently lacking knowledge of computer technology, and with former management experience limited to credit cards, cookies, and smokes, Gerstner's appointment was widely criticized. Pundits gave him little chance to correct IBM's problems. He was considered a lightweight -- at best a caretaker qualified only to preside over the orderly dissolution of the cadaver.

In his book Saving Big Blue, Robert Slater chronicles how Gerstner not only proved his critics wrong but is credibly on track to joining the pantheon of business legends populated by such worthies as Jack Welch, a CEO about whom Slater has also written extensively.

It is easy to depreciate how mighty IBM once was, and how far it had fallen. By 1985, IBM's total market capitalization was over $100 billion. Its market value exceeded its capital base by almost $54 billion. IBM was the most value-adding, wealth-creating American company by a wide mark. Its leaders and researchers were hailed as the best in the world.

Turn the clock forward to 1992, and IBM's total market value had crashed to less than half of its former peak. At $45 billion, its market capital was about $24 billion less than book capital, a gaping wound sizable enough to qualify IBM with the dubious distinction of being the most...