Speaking at an annual meeting with finance analysts, the IBM boss acknowledged supply problems, including a shortage of skilled staff, had taken their toll in the third quarter.
As the company moved from a PC-dominated business to B2B software, services and hardware, Gerstner said revenue growth would not be the top priority.
He predicted IBM would maintain “high single-digit revenue growth” slightly below the 10 per cent industry growth rate.
“At some point, we may grow faster than the industry, but we’re not going to do that by reaching for revenue at the expense of either fundamental market positioning and making sure we drive substantial cash to reinvest in the business,” Gerstner said.
IDC analyst Andy Brown said that while IBM “seems in a more positive state than earlier in the year”, it still faced challenges in repositioning itself in the market. “SMB is the key battleground in the next year,” he claimed, suggesting IBM was up against the smaller tier-two vendors such as Acer and Maxdata which traditionally focused on the market.
Brown added IBM’s problems with supply had been compounded by its move to reorganise its European business, especially in the UK where it was trying to “reorganise the channel”.
“Trying to change your channel is not easy and it affects your inventory,” he argued.
Gerstner said the supply problems which had cost $100m (£66m) in hard drive revenue in the third quarter were due to demand two to three times higher than IBM had predicted.
He also identified a lack of skilled workers as a problem that would continue to dog IBM and the industry as the global demand for IT skills and knowledge would outstrip supply by about 25 per cent until 2005.