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Highlights—April 16, 2005
- Forbes: IBM May Restructure
After Missing Outlook. Excerpts: International Business Machines Corp.,
the world's top provider of computer hardware, is weighing a "sizable restructuring" after
it surprised investors Thursday with a first-quarter profit that missed Wall Street estimates
by 5 cents a share.
The company said results were hurt by difficulty closing transactions, increased pension expenses
and a drop in sales in Western Europe and Japan. In after-hours trading, IBM shares fell $3.09,
or 3.7, percent to $80.55 a share on heavy volume after being halted earlier in the after-hours
session. The stock fell 93 cents to close at $83.64 Thursday on the New York Stock Exchange. "This
quarter did not play out as we expected," said Mark Loughridge, the company's
chief financial officer, who said the company has begun to address weaknesses in sales. "A
couple of those actions may require some sizable restructuring activities, primarily designed
to move decision making closer to the customer," he said. Details of the restructuring
will come within the next three months, he said.
- Forbes: IBM
Posts 3 Percent Rise in 1Q Profit. Excerpts: Chairman and CEO Samuel
J. Palmisano said, "After a strong start, we had difficulty closing transactions in the final
weeks of the quarter, especially in countries with soft economic conditions, as well as with
short-term Global Services signings. As a result, we did not achieve all of our goals for the
quarter." [...] Total gross profit margin from continuing operations was 36 percent in the
latest first quarter, which includes the effect of expensing equity compensation, compared with
35.6 percent a year ago. IBM said it ended the first quarter of 2005 with $8.7 billion of cash
- CNN Money: Biting
a Big Blue bullet.
IBM is expensing options months before it has to but the stock has taken a hit. Now's a time
- Yahoo! Message Board: "Poor
Sam" by "brokersleaveyoubroke". Full excerpt: Lou already
raided the pension plan, cut benefits to the core, sold anything that wasn't nailed down and then
bailed out at just the right time. Sam's got no way to come up with some quick money to make his
numbers. Plus he'll probably have to give back some of the money Lou took from older workers. Oh
well, here come the layoffs, don't expect anything creative like trying to grow the company.
- Business Week: Beyond
Never mind computers and tech services. IBM's radical new focus is on revamping customers' operations
-- and even running them. Excerpt: It was over a lunch in Cincinnati two years ago that IBM
Chief Executive Samuel J. Palmisano got his first inkling of Big Blue's next act. Palmisano
was talking business with A.G. Lafley, CEO of Procter & Gamble Co., one of IBM's big customers.
At one point, Lafley asked Palmisano to estimate how many of P&G's 100,000 employees it truly
needed to keep on its payroll. When Palmisano didn't venture a guess, Lafley stunned him by saying
that P&G might be able to get by with only a quarter of its workforce. Specialized service companies
might be able to handle everything else, from human resources to customer care. [...] Related items:
- New York Times: Racing
Its Rivals, I.B.M. Risks Tripping Itself Up.
By Steve Lohr. Excerpts: he disappointing performance that I.B.M. reported late Thursday may
be nothing more than a momentary stumble. But the earnings shortfall, which dragged down the
market, also points to the risk in the company's strategy for its corporate services business
- the main engine of I.B.M.'s growth and its hope for a prosperous future. I.B.M. is making an
ambitious shift in its services business to move beyond helping corporate customers run their
data centers to using information technology to make their business operations more efficient.
It means putting I.B.M. researchers and software programmers to work for customers to redesign
and automate business tasks like procurement, human resources management, accounting and customer
service. Customers often hand these tasks over to I.B.M. [...] Company executives gave no guidance
for the second quarter, but said that analysts' profit estimates for the second half of the year
were still "reasonable." Mark Loughridge, chief financial officer of I.B.M., told analysts
in the Thursday conference call, "We're driving to get there a different way, on lower revenue,
and more cost and expense savings." I.B.M., analysts say, may well trim its payroll by 5,000
or 10,000 workers in its cost-cutting drive, especially in Europe, where business was particularly
Message Board posting by "ibmoptioneer". Full excerpt: There is always a
positive and a negative spin to every financial event. Like looking at a half full or half empty
The pension is a smokescreen. Failure of executives to execute properly is the keyword here.
True, they could have known that things were bad so why not pile all the bad news at once. The
only problem is that if retention becomes a problem net new options issued will have to be
expensed in 3Q and 4Q. This will be (as it should) a permanent variable hit on earnings.
This event can also be a way to hide other problems from shareholder view. As analysts focus
on the announcement and its effects, the options expensing is another focus, but then something
else could be hiding in the works for the AGM.
The unusual moves will definitely trigger a look-see by the regulatory and investigatory government
entities. This is always the risk in executing an unusual move.
My take is that barring other bad news at the AGM, things will stay stagnant until the restructuring
is announced and analyzed by the street.
Debt and debt service is a looming problem. Ratios were bad and now worse as the valuation declines.
The pension thing is a self-created problem that Lou screwed up. They are just taking a payback
for the vapor profits of the 90's.
Sam would do good if he personally took out several key high level executives. Take the industrial
sector, for example. Someone ought to pay for the -1% performance there. Same thing for the
poorest performing technology or product area. The troops on the trenches now have to see some
executive blood flowing or Sam faces a potential employee insurrection if he just cuts troops
on the ground.
- Yahoo! Message Board: IBM
South Africa outsources their pension fund, by Janet
Krueger. Full excerpt: A friend of mine from South Africa just sent me a copy of a letter
recently sent to IBM South Africa retirees. I posted it in the files
area of this board at:
http://tinyurl.com/a7m5k. Be aware, if you read this, that pension protection laws in South
Africa are much different than they are here.
- Business Week: HP's
$58,000-a-Day Interim CEO. By Peter Burrows. Excerpts: In another show of generosity at the
tech giant, CFO Robert Wayman is getting a $3 million bonus for his 52-day post-Fiorina stint
Talk about a good 52 days work. According to an Apr. 5 government filing, Hewlett-Packard's
board has agreed to pay Chief Financial Officer Robert Wayman a $3 million cash bonus for serving
as interim CEO from Feb. 8, when it ousted Carly Fiorina, to Apr. 1, when former NCR Chief
Executive Mark Hurd was hired.
- New York Times: Pensions:
Big Holes in the Net. By Mary Williams Walsh. Excerpts:
James McDonald, a former New York longshoreman, worked for 23 years under a pension plan that
greatly penalized people who took time off in midcareer. He himself had such a gap: he worked
for 13 years, then took three years off for medical reasons before working another 10. When he
retired in 1997, he began receiving a pension of $263 a month, an amount reflecting just his
last 10 years of service. The plan said his first 13 years did not count. Such plan rules have
been unlawful since 1976, but federal regulators police this provision desultorily, if at all.
So Mr. McDonald found a lawyer, filed suit against the plan and began a long, slow slog through
the legal system. Finally, last month, a judge confirmed that his pension plan was indeed illegal,
ordered it changed and increased Mr. McDonald's benefit nearly fourfold, to $1,000 a month, retroactive
to 1990 with interest. But by then, Mr. McDonald was no longer around to enjoy the victory. "He
died in the meantime," said
his lawyer, Edgar Pauk. [...]
Each year in its annual report, the department's Office of Inspector General
issues a list of its 10 greatest "management challenges," and the protection of pensions
is always on the list. Other difficulties come and go, but year after year the pension challenge
One example involves cash-balance pension plans - a relatively new type
of pension that has generated conflict at many companies that introduced it. A cash balance plan
combines some features of a traditional pension with those of a 401(k). For the last three years,
the inspector general has cited evidence that some of these plans are miscalculating payouts to
employees, shortchanging them if they leave before the normal retirement age.
But the Labor Department has resisted the inspector general's calls for
action. Problems concerning underpayments fall to the I.R.S., it said. In February 2002, the
Labor Department asked the tax agency to determine whether any laws were being broken. It has
duly followed up every three months since then. But so far, the I.R.S. has not answered. If
link is broken, view Adobe Acrobat
- New York Times: Ailing
By Paul Krugman. Excerpts: So what's the problem? Why not welcome medical progress, and consider
its costs money well spent? There are three answers.
- First, America's traditional private health insurance system, in which workers get coverage
through their employers, is unraveling. The Kaiser Family Foundation estimates that in 2004
there were at least five million fewer jobs providing health insurance than in 2001. And health
care costs have become a major burden on those businesses that continue to provide insurance coverage:
General Motors now spends about $1,500 on health care for every car it produces.
- Second, rising Medicare spending may be a sign of progress, but it still must be paid for -
and right now few politicians are willing to talk about the tax increases that will be needed
if the program is to make medical advances available to all older Americans.
- Finally, the U.S. health care system is wildly inefficient. Americans tend to believe that
we have the best health care system in the world. (I've encountered members of the journalistic
elite who flatly refuse to believe that France ranks much better on most measures of health
care quality than the United States.) But it isn't true. We spend far more per person on
health care than any other country - 75 percent more than Canada or France - yet rank near
the bottom among industrial countries in indicators from life expectancy to infant mortality.
To get effective reform, however, we'll need to shed some preconceptions
- in particular, the ideologically driven belief that government is always the problem and
market competition is always the solution.
The fact is that in health care, the private sector is often bloated and bureaucratic, while
some government agencies - notably the Veterans Administration system - are lean and efficient.
In health care, competition and personal choice can and do lead to higher costs and lower
quality. The United States has the most privatized, competitive health system in the advanced
world; it also has by far the highest costs, and close to the worst results.
If link is broken, view Adobe Acrobat version [PDF--32KB]
- New York Times: The
Medical Money Pit. By Paul Krugman. Excerpts: But in any
case, Britain isn't the country we want to look at, because its health care system is run on
the cheap, with total spending per person only 40 percent as high as ours. The countries that
have something to teach us are the nations that don't pinch pennies to the same extent - like
France, Germany or Canada - but still spend far less than we do. (Yes, Canada also has waiting
lists, but they're much shorter than Britain's - and Canadians overwhelmingly prefer their system
to ours. France and Germany don't have a waiting list problem.)
Let me rattle off some numbers.
In 2002, the latest year for which comparable data are available, the United States spent $5,267
on health care for each man, woman and child in the population. Of this, $2,364, or 45 percent,
was government spending, mainly on Medicare and Medicaid. Canada spent $2,931 per person,
of which $2,048 came from the government. France spent $2,736 per person, of which $2,080 was government
Amazing, isn't it? U.S. health care is so expensive that our government spends more on health
care than the governments of other advanced countries, even though the private sector pays
a far higher share of the bills than anywhere else. [...]
The authors concluded that Americans spend far more on health care than
their counterparts abroad - but they don't actually receive more care. The title of their article? "It's
the Prices, Stupid."
Why is the price of U.S. health care so high? One answer is doctors' salaries: although average
wages in France and the United States are similar, American doctors are paid much more than
their French counterparts. Another answer is that America's health care system drives a poor
bargain with the pharmaceutical industry.
Above all, a large part of America's health care spending goes into paperwork. A 2003 study
in The New England Journal of Medicine estimated that administrative costs took 31 cents
out of every dollar the United States spent on health care, compared with only 17 cents in
Canada. If link is broken, view Adobe Acrobat
- USA Today: Drug
prices outstrip inflation.
By William M. Welch. Excerpt: Wholesale prices for popular brand-name prescription drugs rose
an average 7.1% in 2004, more than twice the general inflation rate, a new study commissioned
by the nation's largest seniors lobby says.
The increase is the biggest in the five years that AARP, with 35 million members, has sponsored
the study. It's just slightly higher than the 7% price rise in 2003. The group, which has pushed
for lower drug prices, is set to release its report today.
The findings come from an examination of prices charged by manufacturers on 195 brand-name
prescription drugs widely used by Americans 50 and older. The study's authors said such increases
are routinely passed on to consumers in retail prices.
Bill Novelli, the group's CEO, called the increases disappointing, particularly in the year
after President Bush signed a sweeping overhaul of Medicare. The new law will provide seniors
with a prescription-drug benefit next year. But it prohibits the government from negotiating
drug prices on behalf of consumers.
- Orange County Register: Private
plans haven't delivered the cure. Excerpts:
Bruce Bodaken, CEO of Blue Shield of California, warns that, unless we reduce health-care costs
and provide coverage for the uninsured, we will likely turn to a government-run single-payer
That raises two questions. Why hasn’t Bodaken’s own industry been able to solve
the problems during the past half-century that it has had control of health care spending?
And what is there about a single-payer system that would cause policy-makers to turn to that
Private health plans should be providing us with higher quality at lower
cost. But by most measures, we are receiving relatively mediocre care that is rife with error
and wasteful excesses, while many are not receiving even the most basic essential services.
And over 90 percent of Americans agree that health care costs are out of control. Since private
plans are failing us on cost and quality issues, are there any other reasons to keep them in charge?
Do private plans avoid the inherent waste of government bureaucracies?Unfortunately, private
plans actually consume a far greater percentage of health care dollars in administrative
costs than do public programs such as Medicare. And worse, our fragmented system of funding care places
a tremendous,wasteful administrative burden on the providers of health care.
- Peoria Journal-Star: Caterpillar
retirees discuss lawsuit. Workers claim company
promised lifetime benefits. Excerpts: Retired Caterpillar workers met Saturday to talk about
pursuing a lawsuit against their former employer to try to regain company-paid health-care
benefits. "It was wrong from the start because they promised me in '88 that when I retired . . . that
I would never pay," said Chauncey Redfield, who retired in 1996.
"I gave them 33 years of faithful service for them to rip me apart when (I) retire." More
than 300 retirees met Saturday morning at the Veterans of Foreign Wars hall in Creve Coeur to discuss
the possibility of a lawsuit to seek to restore company-paid health benefits that were stripped from
the 3,200-plus United Auto Workers who retired after 1992. The retirees claim the company previously
had promised to pay for lifelong benefits.
- Hartford Courant: The
Gilded Age Is Back In Vogue. By
Warren Goldstein. Excerpts: OK class, it's time for a history quiz. Don't worry. It won't affect
your grade, just the future of your country. Say you were living in an era of American history
marked by a growing gap between rich and poor, increasing insecurity for the middle and working
classes, wholesale political corruption, daring corporate chicanery and an executive branch
dedicated to helping the rich get richer. When were you living?
Right! The Gilded Age, that late-19th-century period dominated by robber
barons and forgettable presidents, an era boasting astonishing, historically unprecedented
wealth alongside the ugliest poverty and abuse of power. For a quarter-century, the U.S. government
acted as an unabashed, breathtakingly shameless agent of the wealthiest Americans. Forget what
you learned in high school about laissez-faire; the truth is that the federal government intervened
repeatedly in the economy - nearly always on the side of the rich. [...]
This president has offered more blatant class legislation than we've seen
since the 1890s. Tax cuts for the richest Americans have done double duty, lining their pockets
while starving the state and federal budgets that provide services for the poor and middle
class. Public transportation? Why bother when the rich don't use it? The president's current
budget cuts 150 social programs. How many of those were directed toward rich people? You guessed
The recent Class-Action Fairness Act provided even more class action and
less fairness, protecting irresponsible corporations from jury (read, regular people) awards.
The Bankruptcy Abuse Prevention and Consumer Protection Act stands up bravely for credit card
companies (including No. 1 GOP contributor MBNA) and sticks it to ordinary consumers who've run
up credit card debt, even if they had succumbed to predatory lenders or serious medical problems.
All the while, student mailboxes overflow with slick credit card come-ons; health insurance premiums
are skyrocketing; and employers are slashing health benefits. If this were a TV commercial,
we'd call it "priceless."
What about the "bankruptcy abuse" perpetrated by Enron, Tyco and WorldCom, which got
protection from their creditors by declaring bankruptcy and whose officials looted thousands
of pensions? It may be a while before you see the Corporate Bankruptcy Abuse Prevention and
CEO Responsibility Act.
- Los Angeles Times: Wages
Lagging Behind Prices. Excerpts: For the first time
in 14 years, the American workforce has in effect gotten an across-the-board pay cut. The growth
in wages in 2004 and the first two months of this year trailed inflation, compounding the squeeze
from higher housing, energy and other costs. [...] The effective 0.2-percentage-point erosion
in workers' living standards occurred while the economy expanded at a healthy 4%, better than
the 3% historical average. Meanwhile, corporate profits hit record highs as companies got more
productivity out of workers while keeping pay increases down. Some see climbing profits and stagnant
wages as not only unfair but also ultimately unsustainable. "Those
that are baking the larger pie ought to see their slices expanding," said Jared Bernstein,
an economist with the liberal Economic Policy Institute in Washington.
- New York Times: Falling
Fortunes of Wage Earners. By Steven Greenhouse. Excerpts: Beginning in the mid-1990's, pay
increases for most workers slowly but steadily outpaced the rate of inflation, improving the
living standards for nearly all Americans. But an unexpected reversal last year in those gains
has set off a vigorous debate among economists over whether the decline is just a temporary dip
or portends a deeper shift that may cause the pay of average Americans to lag for years to come.
[...] Whatever the explanation for Sprint's action, many economists, liberal and conservative,
are perplexed by two unusual trends. Wage growth has trailed far behind productivity growth over
the last four years, and the share of national income going to employee compensation is low by
historic standards. [...]
"These factors aren't going to go away," he said. "The competitive
pressures for companies to hold the line on labor costs are intense, and the alternatives they
have - technological substitution and offshoring labor - are growing."
The overall wage figures hide a split, with an elite group getting relatively large gains.
In a study of census data, the Economic Policy Institute, a liberal research group, found that
for the bottom 95 percent of workers, after-inflation wages were flat or down in 2004, but
for the top 5 percent, wages rose by an average of 1 percent, with some gaining much more. The upper-income
group enjoyed strong pay increases largely because of bonuses, stock options and other inducements
and because of robust demand in certain fields, like law and investment banking.
- Carl Lackey comments
on this article. Full excerpt: QUOTE:
"Pay increases are not rebounding, even though the factors normally
associated with higher pay have rebounded," said Peter LeBlanc of
Sibson Consulting, a division of Segal, a human resources consulting
UNQUOTE. No mention is made of the flooded high-skill people-market because of
job cuts related to outsourcing their jobs to overseas locations.
Wouldn't that be a key reason for compensation being suppressed?
...and the related reduction in government tax and ss collections?
...and related erosion of nest eggs?
If I am making a correct assumption, it suggests that historical trends
are no longer valid predictors because the conditions are different.
- "chz_whiz" comments. Full excerpt: You're correct in your assumptions. Although the number of
jobs is up, salary levels are being held down because of a changing mix in
the labor market. Higher paid folks (especially non-execs) are
leaving industry due to retirement and lay-offs. Younger folks are
filling lower paying jobs, such as all the new Wal-Marts, Targets and
Home Depots. Off-shoring is trading high paying US jobs for low
paying Asian jobs. Result, as the article points out, is that wages
have not kept up with inflation.
- Linda Guyer comments. Full excerpt: I would not say historical trends are no longer valid predictors
...you have to go back further in time in US history to see similarities
to the vast income disparities of today ...think back to the late
19th and early 20th centuries and the days of JP Morgan, Vanderbilt
and Rockefeller, the mega millionaires of their day.
- Carl Lackey comments. Full excerpt: Yes, you are so right.
My forecast for today's middle class wage earners is that they are being
returned to the historic levels of approximately
pre-union, and Pre-WW II. That would suggest that the government's main tax burden will have to be
supported by those still earning reasonable wages and up. ...and that
tax burden will increase even more because of the social programs and
increased crime rates triggered by more and more desperation.
- Washington Post: House
Passes Permanent Estate Tax Repeal. By Jonathan Weisman.
Excerpts: The House vote pitted repeal proponents, who held that a tax on inheritances is fundamentally
unfair, against Democrats, who questioned how Congress could support a tax cut largely for the
affluent that would cost $290 billion over 10 years, in the face of record budget deficits. "This
is reverse Robin Hood," said House Minority Leader Nancy Pelosi (D-Calif.). "We're taking
money from the middle class and giving it to the super-rich." [...] By a 194 to 238 vote, the
House rejected a Democratic counteroffer, which would have shielded $3.5 million of an estate's
value from taxation, enough to exempt 99.7 percent of estates from the inheritance tax, according
to the Urban Institute-Brookings Institution Tax Policy Center. Members then approved the measure,
strongly backed by the White House, that would make a full repeal permanent. The repeal is scheduled
to take effect in 2010, then disappear in 2011.
- New York Times: Long
Live the Estate Tax. Excerpts: For the fourth time in four
years, the House of Representatives has passed a bill calling for the permanent repeal of the
federal estate tax. The Senate should put a stop to this silliness. The only thing driving the
push for repealing the estate tax is ideology. It sure isn't sound tax policy. The House proposal
would cost the federal government a whopping $290 billion through 2015, according to estimates
by Congress's own budget agency. And that's just the start; the costs after that would be explosive.
And for what? Repeal would shield the estates of the very wealthiest Americans from the tax.
That's the same group that already benefits the most from Mr. Bush's tax breaks for dividends
and capital gains. Repeal of the estate tax was deemed too expensive in 2001, when the government
was still enjoying the Clinton-era budget surplus. So it stands to reason that it's out of the
question today, as America's enormous deficits weaken the domestic economy and the country's
international economic leadership. But to its proponents, estate-tax repeal is the holy grail
of the Republican anti-tax crusade.
- Jim Hightower: Flim-Flamming
CEOs Walk Free. Excerpts: There's a word for people
who take money from others under false pretenses. The word is: Criminal.
But this word does not apply to corporate CEOs, even if they are guilty of the kind of flimflam
that would send common hucksters to prison. Instead of bilking people in Ponzi schemes, some
CEOs fleece investors by claiming to have achieved enormous profits in the previous year, when
the company actually made much less or even suffered a loss. These executives cook the books
to make the corporation's performance (and theirs) look far better than it is, thus artificially
jacking up the company's stock price and duping investors into putting more money into the
scam. The executives, who get rewarded based on meeting profit goals, walk away with millions.
- Business Insurance: Bill
would publish firms shirking health benefits. By Joanne
Wojcik. Excerpts: Colorado would publish a list of employers that provide little or no health
insurance to their employees if a bill introduced last week in the state Legislature becomes
Under H.B. 1245, the state would reveal how much any uncompensated care provided to employed
individuals is costing the state's Medicaid program.
- AFL-CIO Executive
Pay Watch. Excerpt: In 2004, S J. Palmisano raked in $21,565,586
in total compensation including stock option grants from International Bus. Machines.
From previous years' stock option grants, the International Bus. Machines executive cashed
out $2,808,941 in stock option exercises.
And S J. Palmisano has another $34,904,077 in unexercised stock options from previous years. Show me
how I compare...
|Coverage on H1-B and L1 Visa and Off-Shoring Issues
- Washington Post: As
Government Cap on Work Visas Rises, So Does Confusion. By S. Mitra
Kalita. Excerpt: The two engineers have been ready for months. One waits in Colombia,
the other in Argentina. They are experts in wind technology, a fast-growing segment of
the electricity industry. Their employer, Tampa-based Granite Services Inc., says projects
have been delayed as it awaits their arrival -- and their visas. So the company's human
resources manager keeps an Internet browser open to the Federal Register, clicking its
refresh button every few minutes. How many visas remain? Should applicants hold a master's
or PhD? Will a bachelor's do? The agency in charge is also looking for answers. Last
month, U.S. Citizenship and Immigration Services, an arm of the Department of Homeland
Security, said it would issue an additional 20,000 visas for highly skilled foreign workers
because this year's cap had already been met. All 65,000 of the H-1B visas for this year
were filled by U.S. businesses on Oct. 1, the first day of the government's fiscal year.
In response to complaints from businesses, Congress in November passed legislation approving
the additional visas, saying they should go to graduates of U.S. institutions with an
advanced degree. But last month, the immigration agency said the visas could go to anyone
with a bachelor's degree, confusing businesses and immigration lawyers.
- CNET News.com: Indian
police make arrests in outsourcing fraud. By Dinesh C.
Sharma. Excerpt: Police have arrested former employees of an Indian call center that handles
U.S. customer accounts for allegedly stealing consumers' funds. The suspected gang members
arrested by police in Pune included three ex-workers of Mphasis BPO. Police said the
employees allegedly stole customers' personal account information and transferred around $350,000
to fake accounts in Pune. Sanjay Jadhav, the assistant commissioner of police, said about $23,000
(1 million Indian rupees) of the fraud money has already been recovered. The call center workers
left their jobs last December.
- Computerworld: China,
India can lead global IT, says Chinese premier.
Wen Jiabao talked of 'the coming of the Asian century of the IT industry'. Excerpt: A
combination of Indian software skills and Chinese hardware expertise can take both China
and India to a leadership position worldwide in IT, Chinese premier Wen Jiabao said yesterday
in Bangalore, India. "When that particular day comes, it will signify
the coming of the Asian century of the IT industry," he said.
- Computerworld: Costco
Aims to Avoid Offshore Dependency. By Patrick
Thibodeau. Excerpts: Retailer Costco Wholesale Corp. uses offshore development but is still
hiring lots of programmers internally. Don Burdick, senior vice president of information
systems at Costco, said last week that he has about 60 vacancies for developers with
RPG, .Net and Java skills on his programming staff, out of a total of 250 positions.
The underlying philosophy at Issaquah, Wash.-based Costco, which had revenue of about $48
billion last year, is "that our own employees do it better," Burdick said at
the Gartner outsourcing conference. He added that Costco typically promotes from within
when higher-level IT jobs open up, because it wants to retain the business knowledge that
workers have accumulated.
"We're actually able to give people good career paths inside our own IT organization,
and we believe that encourages them to get in and really learn the business," Burdick
said. "That's a huge competitive advantage."
- New York Times: Bush
By Thomas L. Friedman. Excerpts: One of the things that I can't figure out about the Bush
team is why an administration that is so focused on projecting U.S. military strength
abroad has taken such little interest in America's economic competitiveness at home -
the underlying engine of our strength. At a time when the global economic playing field
is being flattened - enabling young Indians and Chinese to collaborate and compete with
Americans more than ever before - this administration is off on an ideological jag. It
is trying to take apart the New Deal by privatizing Social Security, when what we really
need most today is a New New Deal to make more Americans employable in 21st-century jobs.
Thomas Bleha, a former U.S. Foreign Service officer in Japan, has a
fascinating piece in the May-June issue of Foreign Affairs that begins like this: "In
the first three years of the Bush administration, the United States dropped from 4th
to 13th place in global rankings of broadband Internet usage. Today, most U.S. homes
can access only 'basic' broadband, among the slowest, most expensive and least reliable
in the developed world, and the United States has fallen even further behind in mobile-phone-based
Internet access. The lag is arguably the result of the Bush administration's failure
to make a priority of developing these networks. In fact, the United States is the
only industrialized state without an explicit national policy for promoting broadband." [...]
Since it took over in 2001, the Bush team has made it clear that its
priorities are tax cuts, missile defense and the war on terrorism - not keeping the
U.S. at the forefront of Internet innovation. In the administration's first three years,
President Bush barely uttered the word "broadband," Mr. Bleha notes, but when America "dropped
the Internet leadership baton, Japan picked it up. In 2001, Japan was well behind the
United States in the broadband race. But thanks to top-level political leadership and
ambitious goals, it soon began to move ahead.
"By May 2003, a higher percentage of homes in Japan than the United States had broadband.
- Los Angeles Times: Scapegoat,
Made in China. Excerpts: Global trade
isn't all that complicated. Just think of the world as a mall, the United States as its
most indefatigable shopper and China as the anchor department store that graciously keeps
raising our credit limit so that our buying spree can go on.
The U.S. trade deficit rose to a record $61 billion in February, in large measure
because of rising oil prices and those escalating credit card bills from China. Sluggish
growth elsewhere has tempered demand for U.S. exports despite a weaker dollar. Although
trade deficits are usually portrayed as bad news, they tend to widen when the U.S.
economy is expanding. It's also true that the notorious deficit with China — $14
billion in February — is
overstated in an important sense. The bulk of this comes from all-American transactions:
the shipment back to the U.S. of goods made in China by U.S. companies. You can debate
the pros and cons of American companies boosting their profits and giving consumers
lower prices by outsourcing manufacturing to China (now mostly from nations such as
Mexico instead of the U.S.). But let's not pretend that the United States is being
taken by wily foreigners who don't play by the rules, as too many wily politicians
in Washington are doing.
|Vault Message Board Posts
and Labor and the New Scam" by "CandorSense". Excerpts: This
is not about the Free Movement of labor. This discussion is about the FLAWED movement
of labor due to inept US govt workers and policies. The H1 visa system has been used
for years by hundreds of thousands of Indians (lets be honest folks....it is in the
stats and the prime scammers are Indians) to scam the system. Yes scam the system because
the intention of the H1 program was NOT to accommodate employment dumping, the intent
was to fill jobs that could not be filled with citizens. And if you think we need several
hundred thousands Indians here in the USA doing basic coding then you are nuttier than
a fruit cake.
But listen up...
The new scam is the "L" visa. This one allows a company to bring a worker here and
claim that it is, an, Intercompany Transfer. The ranks of Wipro, Infosys etc in the
USA are filled with these new scammers. Wipro will bid a contract and undercut IBM
and others, and then, if they win, they simply hire people in India, tell them to
claim they have been employed by the firm for at least 3 years, and then Intercompany
transfer them. In FY 2005 the number of L visas is expected to exceed the number
of H visas... And if you think these jobs cant be filled locally, or that India represents
90% of the high tech employment pool and thus rightly should be 90% of the H or L
visa applicants..... I have a bridge to sell you.
Ceiling" by "CandorSense". Full excerpt: I am reasonably certain
some PWC heritage employees might suspect there is a glass ceiling but their suspicions
would be wrong. IBM more than most companies values "results". Unfortunately,
PWC's culture was one of hierarchical hazing, performance/results subterfuge, and no
diversity. Look at the numbers people. On acquisition, it should be clear that PWC was
a money losing operation, big time. The PWC business model could no longer support the outrageous
compensation levels of partners who couldn't sell and the fall over deals from the tax/audit
side were coming to an end.
IBM saved PWC's bacon and in the process, acquired some adept resources below the
partner/associate partner level. IBM also acquired a large slug of partners/associate
partners who have been a huge drag on profitability ever since. If some of these partner/associate
partner slugs feel there is a glass ceiling, they could do everyone a favor by taking
their assets elsewhere.
again" by "Dose of reality". Excerpts: Regarding
my objectivity, my legacy of posts here leaves no doubt as to my evaluation of the "leadership" of
PwC prior to the acquisition.
The seeds of the business challenges were planted well before the sellout to IBM.
Partner compensation was ratcheted up exponentially during the boom years, and the
trickle down to the workhorses was fractional. While it was better than they could
get in industry, it just barely covered the costs of worklife imbalance, unless you
factored in the expected value of making partner. That left a delicate equilibrium
in employee relations that had to be actively managed.
However, when the bubble burst, the partner class scrambled to maintain
bloated compensation levels, and used compensation levels of staff as a lever without even considering
the impact on staff motivation. The problem was that the leaders that were elevated in PwCC
were the integration revenue kings, not the professional managers,and the chain of command was
so weak that it eventually turned into a resource grab free-for-all.
Now, enter IBM. They structured a deal with golden handcuffs for the
partner class who would ultimately end up to be redundant and obsolete anyway, and accelerated
the screwing of the worker class through “compensation normalization”. That is the
brain drain that destroyed the franchise – it was in the middle and upper-middle of the
pyramid. If the deal could have been structured in a way to allow financial resources to be
applied to the real long term resource investments, we would not be in the position we are in
right now. However, a deal that gave IBM carte blanche with partner dismissal would never be
accepted by the sellers (can you say "conflict of interest"?), at least those in the
consulting side of PwC. Mind you that this is coming from someone who benefited from this bad
decision, so again – don’t ever question my objectivity.
It was the structure of the deal and the integration strategy that destroyed
the intrinsic value of the assets, but it was there for the taking for any company that understood
resource management in the consulting industry.
ways" (to cut costs) by "deep_eye". Excerpts:
- Client sites will frequently have going-away parties, baby showers, retirements,
etc., BCS staff should just swing by and avail themselves of these consumable cornucopias.
- Many US metro centers are within close proximity of rail lines. Instead of taking
those boring and stressful flights, why not just skip on down to the local rail yard
and jump aboard the next open box-car?
Careful though! IBM will NOT reimburse for lost limbs, should you slip while boarding.
Just think! Within days you will be deposited within walking distance of the client
site. And! Don't discount the engaging and interesting "rides" you will
share your very own sleeper-suite car with!! Many of whom are between jobs or just "moving
on" following those judicial misunderstandings. What special fun for you.
- If you find you must eat the occasional meal out, here is a workable strategy
to trim those pesky costs. When the check arrives, excuse yourself and head to the
bathroom - see that window? Can you squeeze through into the alley? There you go,
half way to savings already.
- Why pay those ridiculous costs for a hotel/motel room?
Have you ever noticed how many stores in US cities have semi-enclosed vestibules?
What could be more charming, appealing or thrifty? When the BCS consulting team
arrives in the client city, break up into groups to scrounge for cardboard, rags,
papers, etc., In no time, you will have transformed that storefront into a BCS
habitat that would make the Ritz look like a homeless shelter. And think of the
- Hey - speaking of homeless, they know all the best soup lines. When you get to the client
site, you can buddy-up with these fascinating wayfarers and get the lowdown on the best eats
and budget lodgings in town!
- Don't like paying that insane cab fare from the airport to your hotel? No problem.
Once you are in the cab, grab your chest and scream - "I think this is the big
one, I'm fading fast." When you arrive at the emergency room, say, I think it's
a miracle!! I'm saved, jump out and run away (note to BCS newbies - DO NOT pull this
if your bags are in the trunk).
Cost Savings Ideas" by "howard stern". Excerpts: 1) Select cheapest flight
using an unlimited number of stop overs and layovers. 2) Tents - who needs a hotel room...build
communes in public parks. One porto potty per hundred. 3) Get arrested in client cities
- Jails are housing...with work release this could work well.
4) Do a John Belushi from animal house and eat food while in checkout lines. 5) Squeegee
time after hours.
serious ideas..." by "F***IBM". Full excerpt: They should make
bonuses miniscule and delay the tiny annual raises from January until later in the year.
What -- they've already done this? Oh ....sorry. Never mind.
spin" (referring to IBM's latest earnings announcement) by "Dose
of reality". Full excerpt: "We are not organized to serve our markets effectively...closer
to the customer...."
So we move major functions to Eastern Europe??!
Sam...Listen to me...
You are sitting on a disjointed, siloed, set of businesses, run by career political
game players that look at business life as an internal zero sum game, and have a strategy
that the market hasn't been interested in for years.
So let's just continue to cut costs, squeeze the next highest layer of real talent out
of the organization and live to die another day!
Who do you report to anyway?!
|Coverage on Social Security Privatization
- Center for American Progress: Open
Letter to Progressive Policymakers. On Clear Lines on Progressive Savings Accounts. By
Excerpt: As one who believes progressives must support responsible and fair efforts to
enhance Social Security's solvency and as a strong supporter of progressive savings options
outside of Social Security such as a Universal 401K, I believe it is crucial that progressives
be crystal clear about what would constitute an acceptable effort to increase pension
and personal savings outside of Social Security, and what constitutes harmful regressive or
partial privatization proposals.
While the language and design of varying Social Security and savings account options can
be complex and murky, the principles that define what progressives should stand for
and what they should reject are straightforward. When it comes to new individual accounts or savings
options, they should meet three clear principles:
- Los Angeles Times: Bush
Points to a Retirement System With Mixed Results. By
Peter G. Gosselin and Edwin Chen. Excerpts: President Bush came to Ohio on Friday to highlight
a state retirement savings system that he said showed that Americans would be better off
handling their own old-age investments through personal accounts than relying on traditional
Social Security. But that state's version of personal accounts has attracted few takers
among the people eligible — Ohio's
750,000 public employees. And records show that the most widely chosen version of the
state-offered accounts has racked up a five-year earning record of 1.86%, about the same
return that the president says Social Security produces. [...] Part of any Social Security
fix, the president told his audience, should be "to trust people with their own money, to
devise a system that would work similar to the state of Ohio, that would say, 'We're going
to let you earn a better rate of return for your money.' " But in the biggest of Ohio's
several state retirement programs, the popularity of the private accounts and the returns they
produce are relatively low.
on the Alliance@IBM Site:
- Burlington Free Press: IBM
executive launches attack on health plan. Excerpts: Earl
Mongeon of Westford, a 26-year manufacturing employee at IBM's Essex plant, had heard
enough. The occasion was one of the internal "All Hands" meetings that the
local plant's top man, John Ditoro, stages periodically to update the facility's 6,000
employees on how things are going at IBM in general and Essex in particular. DiToro has
been using the current round of "All Hands" meetings to persuade
workers to strongly critique a single-payer universal health care plan being put together
by a legislative panel. DiToro told the meetings that the plan will require $1 billion
in new taxes and he strongly encouraged employees to "let your legislators know
what you think," according
to an internal newsletter, which was provided to the Free Press by Sandy Anderson,
a retired IBM employee.
- Job cut alert!
Alliance@IBM is receiving information that a resource action is about to happen in IGS.
Please send any information to firstname.lastname@example.org.
the Think Twice show [Video, approximately
1 hour, requires RealMedia
Player] Editors' note: We highly recommend this video. In it you'll meet leading
activists at the Alliance@IBM, hear about the history of the Alliance, get updates on
Alliance activities around the country, and hear about the shareholder proposals of interest
to IBM employees.