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    Highlights for week ending November 30, 2002
  • The Motley Fool: 8 Turkeys for Thanksgiving. Excerpt: "If turkeys come in all shapes and sizes, this one is big and blue. IBM hit a new low in accounting tricks earlier this year when it quietly used a $300 million asset sale gain to offset operating expenses to close out its last fiscal year. Yes, rather than report the event as a one-time windfall in its income statement, it simply reduced its corporate overhead by the same amount. Talk about a move that gives pro forma results a good name! What really stinks here is not so much that the company has done this before, but rather that it chose to inflate its results through smoke and number-crunching mirrors just months after the Enron implosion. It's like speeding past a cop who was already ticketing someone else. What does IBM stand for? Inconsiderate Boneheaded Move? Let's go over this again, IBM: Ethics above targets. Honesty above chicanery."
    • "carolina_puerto_rican" comments on the Motley Fool article. Excerpt: "Well, the Motley Fool has aptly described one of IBM's stellar contributions to modern large corporation business ethics. Deliver the lowest ethical standards possible that you can get away with to maximize the return. To reduce risk, make sure you create a good propaganda show by forcing the ethics on the employees by making them sign the most stringent and inflexible operating rules in the world. Then let your execs off the hook as required."


  • New York Times: Problem of Lost Health Benefits Is Reaching Into the Middle Class. Excerpt: "The family represents a changing portrait of the 41 million Americans who do not have health insurance today. Once thought to be a problem chiefly of the poor and the unemployed, the health care crisis is spreading up the income ladder and deep into the ranks of those with full-time jobs. According to recently released Census Bureau figures, 1.4 million Americans lost their health insurance last year, an increase largely attributed to the economic slowdown and resulting rise in unemployment. The largest group of the newly uninsured — some 800,000 people — had incomes in excess of $75,000. They either lost their jobs, or were priced out of the health care market by rapidly rising insurance premiums, or, like Ms. MacPherson, both."


  • Lou Gerstner was mentioned in Scott Adam's Dilbert Newsletter, issue #44. Excerpt: "Leadership is a huge weasel scam. You might have noticed that most CEOs are not eager to work for companies that are already in the crapper and rotating clockwise. That's puzzling, because you would think that a confident CEO who believed in the power of his own leadership skills would prefer a challenge -- something with more of an upside potential. But it seems that given the choice between a hard job, like CEO of Bob's Pastry and Muffler Shop, or something easy, like CEO of General Electric, most leaders will opt for the position that could be handled equally well by a sock monkey."

    "If you replaced all of the CEOs of the Fortune 500 companies with Magic 8 Balls (tm), and came back in five years, you would discover that some of those companies had compiled excellent track records by pure chance. The CEO's job in a huge company is essentially the same as the Magic 8 Ball: saying yes, no, or maybe, without the benefit of understanding the questions. A Magic 8 Ball is highly qualified for that sort of work."

    "Recently I heard an interview that CNBC did with Lou Gerstner. He said his biggest contribution as CEO at IBM was changing its culture. His example of how he changed the culture is that when he came into the job there was a lot of talk about breaking up the company into smaller companies; he decided not to do that. In other words, his biggest contribution to IBM was NOT DOING SOMETHING. Then he wrote a best-selling book about his leadership. The Magic 8 Ball would have had a 50% chance making the same decision; a sock monkey would have nailed it on the first try." One more thing: If leadership involved skill, wouldn't we only need one book to describe it?"

  • The Confédération Française Démocratique du Travail (CFDT), the French IBM Union, has recently added an English language "international" section to their Web site. The CFDT international main page lists working hours and days off for IBM France employees that are certain to make American IBMers weep. The IBM Workers International Solidarity (IWIS) page lists member IBM unions from around the world, and includes links to English-language reports from several international IWIS conferences. The main CFDT page is in French, but a link on the page provides for a machine translation to English of the site's French content.


  • "ibmmike2005" comments on former IBM CEO Lou Gerstner's new book. Excerpts: "Seems this book is a 'cover up justification for how he decimated thousands of IBMers who built the company' to get to the old money. Lou states that winning is everything regardless of the cost or expense to others especially people and violation of federal laws. I guess winning is measured in dollars; his $630,000,000 he is walking away with from IBM along with the $1,000,000 annual retirement paycheck (chump change), Lou thinks he has proven himself a winner. How wrong he is."


  • If you have plans to buy Lou Gerstner's new book, "carolina_puerto_rican #2" offers valuable advice on how to do so.


  • A message from Janet Krueger to retirees: One way to stop IBM from doubling your contribution to health insurance every year would be to ask Congress to intervene — Congress could require employers to keep health care promises, in the same way pensions are protected. (Which does not mean pension promises shouldn't be better protected as well!) Unfortunately, one retiree, especially one who cannot afford massive campaign donations, doesn't have much clout in Congress. But if all the retirees who are losing their health insurance banded together, and asked for the same thing, we might see some action! For that reason, several retirees got together and created the National Retirees Legislative Network. Check out their Web site, at www.nrln.org, and see what you think of the legislation they are pushing for. They recently opened their membership to individuals — so you can join and receive their communications for just $10 per year.


  • Reuters: Pension fund accounting gets rulemakers' attention. Excerpt: "The Financial Accounting Standards Board, which sets accounting rules in the United States, will discuss whether to improve pension accounting rules in upcoming meetings with its advisory arm, chairman Robert Herz said in an interview. In recent weeks, pension liabilities have moved up on corporate America's list of woes as the U.S. stock market, which has been on a downward trend for the third straight year, leaves pension plans underfunded and pension costs start biting into earnings. Overly optimistic assumptions about the returns companies expect to earn from their pension assets, which in turn can soften the blow to earnings, have also begun to draw scrutiny."


  • BBS News: Hi-tech workplace no better than factories. Excerpts: "Staff in technology jobs work in the white collar equivalent of a 19th century factory. suffering from isolation, job insecurity and long hours, research has found."


  • PrudentBear Guest Commentary, by Porter Stansberry: The Debt Generation. Excerpt: "Corporate managers have leveraged their balance sheets and used debt to manipulate earnings in order to increase profits, 'grow' earnings and augment the value of their stock in the short term. Stock option compensation gives managers an incentive to take big risks. If the risks work, the managers receive windfall profits. If they don't, managers can walk away unscathed. The worst abusers of shareholder trust aren't hard to find. Just look at America's biggest and most respected companies. IBM bought back $9 billion worth of stock while issuing $20 billion in new debt during Lou Gerstner's reign as CEO from 1993-2000. Why would you issue debt that costs you 8-12% in interest when your stock only pays a 1% dividend? The only reason you'd do this is to juice earnings in the short term. In the long term, you're only adding risk and shrinking your future profit margins.

    But what did Lou care? He received 500 million stock options (all of which he sold when he retired in 2000). There's no doubt that Lou Gerstner leveraged IBM's balance sheet to increase its operating margin. That's not against the law...but it's not the way great companies are built. It's the way great companies are devoured. Since Gerstner's departure, IBM also admitted to booking asset sales as operating revenue - a common accounting trick to hit earnings forecasts. Selling assets is also another way to leverage your balance sheet. Within one year of Lou's retirement, his replacement had taken huge billion-dollar charges, sold off major underperforming businesses (hard drives) and closed non-performing (but long held) businesses like PCs. Unbelievably, Gerstner wrote a self-congratulatory book about his tenure at IBM. It's being published."


  • San Jose Mercury News: Russia joins tech-worker game. Excerpt: "Quick: Name a foreign country with thousands of highly trained software programmers willing to work cheaper than their U.S. counterparts. No, not India. Try Russia. That was the message three-dozen Russian outsourcing companies brought to the second U.S.-Russia Technology Roundtable in San Jose on Thursday. Part of an ongoing dialogue that was endorsed by President Bush and Russian President Vladimir Putin at the Houston summit last year, the round table seeks to foster cooperation between American and Russian technology companies." ... "Russian techies are also inexpensive. An Intel employee in the Russian city of Nizhny Novgorod is lucky to earn 25 percent of what an employee makes in Santa Clara, according to Richard Wirt, general manager of Intel's software and solutions group." ... "Boris Renski, the founder of Selectosa Systems, recently delivered a customized Web-based program for tracking jobs and materials to a California-based advertising company for only $8,000. Selectosa could afford to charge so little because its Russian programmers earn $400 to $600 a month, Renski said."


  • Datamation: Nearly 1 Million IT Jobs Moving Offshore. Excerpts: "Nearly 1 million IT-related jobs will move offshore over the course of the next 15 years, according to a new report released by Forrester Research, Inc." ... "McCarthy estimates that about 3.3 million American jobs and $136 billion in wages will move to countries like India, Russia, China and the Philippines. The IT industry, however, will be leading the initial exodus. Just as with the textile, shoe and automotive manufacturing industries, IT work can be had more cheaply outside of the U.S. Cheaper labor and more relaxed labor rules means a huge cost savings."


  • EE Times: H-1Bs now can stay longer. Excerpts: "Sometimes it seems like lawmakers have their heads in the sand. Do they grasp what's happening in the high-tech job market? Have they seen the reports about rising unemployment among EEs or noticed the jobless rate of 7.9 percent in Silicon Valley during the month of October? I ask because a Justice Department Appropriations Authorization bill signed by President Bush on Nov. 2 has a provision that could affect the job picture for engineers. A section of that legislation extends the current six-year term for H-1B visa holders, who now essentially may stay in the United States indefinitely until they receive a green card, as long as they remain employed." ... "I don't advocate stopping immigration, but it seems to me that bringing in more guest workers at a time when 3.58 million Americans are collecting unemployment insurance is not the best idea. Another 176,000 announced corporate layoffs in October alone means there's a problem. It's not a shortage of labor."


  • AFL-CIO: House Republicans, Bush Leave Unemployed in the Lurch. Excerpt: "Members of Congress turned their backs on unemployed workers after 'sneaking a $2 billion gift for drug companies into the Homeland Security bill and agreeing to provide as much as $100 billion to help out insurance companies in the event of future terrorist attacks is just plain mean-spirited and perverse,' Sweeney said."
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