The president and chief executive officer of IBM has been elected chairman of the company.

Samuel Palmisano, 51, succeeds Louis Gerstner, who is retiring from IBM at the end of the year. Palmisano takes up his position from January 1, 2003.

Since becoming CEO, Palmisano has headed a restructuring of the company's microelectronics unit, the outsourcing of IBM's desktop PC manufacturing, and an acquisition of PricewaterhouseCoopers Consulting, and several software companies.

IBM is preparing a 1.8GHz PowerPC 970 processor – its fastest ever – that will run both 64-bit and 32-bit applications.

Apple currently uses processors supplied by Motorola, but a Reuters report has suggested that Apple will switch to IBM’s new chip.

IBM's much-discussed PowerPC 970 processor was previewed by the company at the Microprocessor Forum.

Shares in the New York-based company fell 2.76 per cent to $74.45 following the Palmisano announcement.