IBM names new PC manufacturing leader

Adalio Sanchez, who had been general manager for ThinkPad laptop computers, will now head manufacturing, procurement and business process engineering operations for IBM's PC division.

The move comes as Robert Moffat succeeds Dave Thomas as head of IBM's beleaguered PC group. The division, which has lost money for about two years, has cut costs and its losses.

ThinkPad is one of IBM's most successful product lines ever, and Sanchez said he hopes to bring some of this savvy to manufacturing operations.

"In this new role, I bring a unique advantage of having run one of our most--if not the most--successful brand," he said. "I have experienced some of these transition things, so I know what needs to get done so the next transition is easier than this one."

Sanchez leaves ThinkPad after running that operation for about two and a half years. He replaces Cathy Manion, who is taking another position at IBM.

"My goal is very simple: If a customer wants to give me money, I want to take it. And I don't want to say no," Sanchez said.

Sanchez is moving from one mess to another, and both are closely related. As first reported by CNET News.com, IBM faces ongoing notebook supply problems spurred by a component shortage on ThinkPad and Nefinity server motherboards.

The laptop bottleneck, which is expected to continue through September, started as a manufacturing problem.

Sanchez is eager to jump on the task of helping IBM's PC group pull out of a long period of unprofitability. The division, which lost nearly $1 billion in 1998, has slowly cut its losses. During the second quarter, the PC division lost $69 million, an improvement of about $100 million from the previous quarter's loss.

"As we go forward, you will see us do a lot to establish better linkages with our sales team to simplify our product line such that we are much more effective than what we have been right now," he said.

Part of Sanchez's job will be cutting costs from IBM's manufacturing and logistics operations and furthering the transition to direct sales. Overall, the PC division plans to cut $1 billion in cost this year, much of that based on changes in how it manufacturers and sells PCs.

"We are making tremendous investments in the personal systems group in our drive to direct" sales, Sanchez said.

In January, IBM stopped selling its consumer line of Aptiva PCs through retail outlets and subsequently increased the number of systems sold directly on its Web site. During the second quarter, direct sales jumped from 5 percent to 24 percent, in line with IBM's goal of 35 percent direct sales by year's end.

Sanchez said inventory management would play an important role in his effort to streamline IBM's supply chain.

"Our strategy is not to have plentiful supply in the channel," he said. "Too much inventory, that is last century's strategy. Yes, we want our channels to have product, but you're not going to see five weeks of product. That is not affordable."

While IBM has made great strides, it still has a long way to go. The division's revenue in the second quarter declined $140 million, though it was an improvement over a $550 million decline the first quarter.