IBM is using three large investment banks to create the illusion of repurchasing approximately 8% of their shares. The transaction is valued at $12.5 billion of shareholder money. 118.8 million shares have been taken off the table.
The result will be an illusion of accelerated earnings per share. What the magic trick does not do is accelerate enterprise earnings by any metric.
The new wrinkle is actually buying shares from those that do not own them, with the very important added nuance of massive scale. Because of this nuance, the investment banks can send a bill to IBM if they start to lose money. There probably will be an adjustment at some point in the future. Watch for paragraph three comments at some point in the future when IBM needs to skate back on side with its publicly disclosed costs.
The disturbing aspect is this. Are the shares truly off the market? How long will it take to actually cover what I think is a modified short position? Will IBM be paying dividends on shares that do or do not exist?
Watch for an SEC investigation. I know IBM and associated parties probably have good advice or at least advice that was more expensive than good. The transaction begs the question that is fundamental in the stock market: How many shares are there? Boiler room operators used to issue tons of shares. This may skirt the issue much too closely.
Yet the company is battling a bugbear that keeps it from breaking out and prevents the stock from really soaring. Ironically, its problem is with the $48 billion-a-year business that saved it from ruin in the 1990s: IT services. What was once IBM's growth engine seems to be turning into a chronically slow-growing, low-margin drag on the rest of the company.
Fresh evidence of IBM's trouble with services came May 30, when the company revealed that it had just eliminated 1,573 services jobs, mostly in North America, bringing to 3,023 the total jobs cut in the high-cost region this quarter alone. That's a small percentage of the company's total workforce of more than 355,000. Yet when weighed against rapid growth in low-cost India, where the staff topped 53,000 at the beginning of the year, the cuts underscore the biggest challenge facing Big Blue: the Indian tech industry. [...]
To improve its efficiency, IBM has adopted the so-called Lean Operations discipline developed by Toyota Motor (TM) for manufacturing cars. It's adapting Lean so it applies to a global service organization, something the top Indian companies began two years ago. The basic principle of Lean Operations is that a company should be making continuous, incremental improvements in its business processes. That's one of the ways IBM figures out where it can eliminate work. The company also keeps a master database, nicknamed "Blue Monster," of all of its services employees. Supervisors use the information to track who is working on what project and when they'll be available for another assignment. In this way, the company hopes to minimize the amount of time people are between assignments.
All of this cost-cutting is the task of Robert Moffat, senior vice-president for integrated operations. His goal is to make the Global Technology Services workforce 10% to 15% more efficient each year. The key for him is to take costs out of the equation through a combination of workforce globalization, process improvements, and replacing manual labor with software. In a little more than six months, Moffat said at the May 17 analysts' meeting, he has rolled out the new formula for 22 of IBM's largest clients in seven countries. In some cases, he said, the clients have seen up to a 50% improvement in productivity. Now, Moffat is extending the new system to 600 more accounts.
All of this huffing and puffing over efficiency won't calm the frazzled nerves of IBM's 155,000-strong services workforce. True, there are still abundant employment opportunities in the company. About 30% of the people whose jobs are eliminated find other jobs within the behemoth, and, in the first four months of this year alone, IBM hired more than 19,000 people. But a lot of those hires were made in India. For the U.S. workforce, there is always fear that jobs will be lost to foreigners.
Back in 2000 and 2001, there was a large number of posts on this board and the pension board that described Gerstner's gutting of the real assets of the business, in order to build high-profit, low-capital lines of business.
Bottom line, IBM went into the body-shop business. We then referred to the new model as the renaming of IBM into "JAFCO". It appears that IBM stayed in that line of business a bit too long, - and now the Indians and Chinese are taking big bites of IBM. And, as its gross revenues shrink, stock buy backs appear to be a desperation move, - in order to keep the books looking good while Palmisano looks to buy real winners, shrink the cost structure and liquidate the frozen pension trust funds through attrition and mortality.
If I were an IBM employee in the USA (and soon, - in India), I'd be looking elsewhere for employment right now. For the past four years, IBM's firings have had nothing to do with performance or morale. They've been desperation moves designed to shrink the corporation down to the quality of its executives and managers.
That's because IBM's services overhaul not only involves cheaper labor -- IBM's work force in India rose from 9,000 in 2003 to 52,000 last year -- but also a quest to use less labor. That means rethinking and sometimes automating the ways that services contracts are carried out. Last year, IBM adopted a business-retooling system known as Lean to find such opportunities.
The company carried out a similar level of job cuts at the beginning of the month, for a total of 3,023 in this quarter and 3,720 for the year, according to IBM spokesman Edward Barbini. One-hundred employees in Boulder were affected as a result of the early May cuts, bringing the total to 145 for the quarter.
On Wednesday, the Armonk, New York-based company said it had contracts with three banks to buy back $12.5 billion worth of its own stock, totaling 8% of all outstanding IBM shares. In a statement IBM said the shares were purchased from the three banks under accelerated share repurchase agreements, which provided IBM with immediate delivery of the shares. IBM added that the banks are expected to purchase an equivalent number of additional shares in the open market during the next nine months. IBM did not disclose which banks were involved in the buybacks.
Now you fire all those guys and hire a bunch of guys from some Balakambastan at 1/6 the original team’s salary. Even if the original team hangs around to train the new guys, the new guys have to ramp up from scratch. And you can rest assured, these kinds of handovers are seldom whole-hearted. Even if this new breed of cheap programmers is excellent, it’s going to take the team a good 6 months to a year to get comfortable with any decent sized code, regardless of how stunning the documentation is. During that time the overall application design will get slightly worse as they try to implement new features in ways that don’t fit in with the original application design.
In the mean time you’ve got 150 other tech companies realizing that people in the rapidly growing market of Balakambastan will work for peanuts and they’ll all move in to the country. Now your new team of programmers are realizing that they can get more peanuts if they do the same sort of job hopping that was prevalent in the 90s dotcom heydays to get more peanuts. So over the course of the next year your new team is replaced by even newer people, whom you have to pay a lot more money, and who are completely unfamiliar with your code base again.
So now you’re paying your latest bunch of Balakambastanis as much as you were paying your original programming team, but these new guys have little to no experience with your code base. Well done!
The truth is — you can only save money in this manner if you buy into the delusion that people are pluggable resources, or that experience counts for nothing (yes, I have also seen people with 30 years of useless experience, but I speak of actual, good quality experience here). To people who believe that in theory you can get as much done with a summer intern as you can with someone with 20 years of technical experience, my simple advice: give it a shot. One of my favorite quotes: If you think education is expensive, try ignorance. - Derek Bok
Outsourcing is great and all, but done en masse, and with such stupor, it only reflects the senseless mismanagement of a giant corporation. Stop by ibmemployee and you will see wherein lies the real malaise of a giant blunder of this nature.
It is correct that you cannot collect your share of the Cooper settlement until you being collecting your base retirement benefit.
It is not correct that your share of the settlement cannot be calculated and will be losing value because you cannot collect it now; it is an age 65 annuity that could be calculated now, and that will be the same when you reach age 65; it will not lose value, and your share will not change because you are not able to collect it now.
I would suggest you write a letter to: IBM Pension Administrator, IBM Employee Services Center, 3808 Six Forks Road, Raleigh, NC 27609
Ask for a complete estimate of what your retirement benefits would be if you left IBM and asked to start your pension on June 1, 2007, including your share of the Cooper Settlement. Include your full name, your IBM employee number, and a mailing address. You should get a full estimate within 30 days; if you do not you can complain to the Department of Labor and IBM can be fined. Keep a copy of the letter!
Once you get the response, file it in a safe place -- even though IBM sold you to another company, they are required by federal law to honor your vested pension benefits, including the Cooper settlement.
Hope that helps; let us know if you are successful!
The decision came in a case involving a supervisor at a Goodyear Tire plant in Gadsden, Ala., the only woman among 16 men at the same management level, who was paid less than any of her colleagues, including those with less seniority. She learned that fact late in a career of nearly 20 years — too late, according to the Supreme Court’s majority.
The court held on Tuesday that employees may not bring suit under the principal federal anti-discrimination law unless they have filed a formal complaint with a federal agency within 180 days after their pay was set. The timeline applies, according to the decision, even if the effects of the initial discriminatory act were not immediately apparent to the worker and even if they continue to the present day. [...]
In a vigorous dissenting opinion that she read from the bench, Justice Ruth Bader Ginsburg said the majority opinion “overlooks common characteristics of pay discrimination.” She said that given the secrecy in most workplaces about salaries, many employees would have no idea within 180 days that they had received a lower raise than others.
An initial disparity, even if known to the employee, might be small, Justice Ginsburg said, leading an employee, particularly a woman or a member of a minority group “trying to succeed in a nontraditional environment” to avoid “making waves.” Justice Ginsburg noted that even a small differential “will expand exponentially over an employee’s working life if raises are set as a percentage of prior pay.” [...]
As with an abortion ruling last month, this decision showed the impact of Justice Alito’s presence on the court. Justice Sandra Day O’Connor, whom he succeeded, would almost certainly have voted the other way, bringing the opposite outcome.
But there’s a catch. When older workers look for jobs, they may get as much respect as Rodney Dangerfield.
It often takes many weeks, or even months, for older workers to find jobs, distinctly longer than their younger counterparts. In 2006, for instance, workers age 55 or older spent an average of 22 weeks looking for work. That was down from 24 in 2005, but still far longer than the 16-week job hunts of workers under 55, according to the Bureau of Labor Statistics.
In the same vein, a study by the Center for Retirement Research at Boston College, sampling employers in Massachusetts and Florida, found that younger workers were about 40 percent more likely to be called in for job interviews than were candidates 50 or older.
Shareholders of Verizon Communications recently passed a measure that would give them an advisory vote on compensation packages for top executives. Shareholders at roughly 20 companies have pushed such say-on-pay proposals. And Congress appears ready to act if companies don’t. The House of Representatives has passed a bill that would give nonbinding votes on pay to all shareholders, like those that Britain and Australia already have. [...]
The post-Enron reforms forced boards to eliminate conflicts of interest among auditors, investment bankers and others. But little was done to address conflicts of interest among pay consultants who may have other lucrative contracts with the same companies — and strong incentives to please the top executives. Those conflicts of interest fuel the irrational rise in compensation — and the growing discontent among investors.
A new corporate policy has employees at the largest U.S. stock brokerage possibly facing punitive action -- including the loss of pay -- if they take more than three sick days without valid excuses. Termination could result after eight sick days. [...]
Efforts to reach employees in various Merrill Lynch offices around the country were unsuccessful as company officials directed them not to talk to reporters.
In addition to interpreting the statute unreasonably and ignoring the relevant precedents, the majority blinded itself to the realities of the workplace. Employees generally do not know enough about what their co-workers earn, or how pay decisions are made, to file a complaint precisely when discrimination occurs. At Goodyear, as at many companies, salaries were confidential. The court’s new rules will make it extraordinarily difficult for victims of pay discrimination to sue under Title VII. That is not how Congress intended the law to be enforced, merely how five justices would like it to be.
That's the lesson of an amazing bit of corporate welfare the Senate tucked into the Iraq war supplemental last week. Last year's bill included a hard-fought political compromise: Carriers that agreed to a "hard freeze" of their pension plans would be allowed to use a higher interest rate in calculating their plans -- which would reduce their net liabilities. The idea was to discourage airlines from buying union peace by running up their pension tabs, which they might later dump on taxpayers. A few airlines, such as Northwest and Delta, took this medicine.
"The claim about these pre-existing conditions was absolutely preposterous," Connecticut Attorney General Richard Blumenthal said. [...]
"What this company did was create the illusion of coverage, when in reality, it would challenge almost any expensive procedure as a pre-existing condition," he said. CBS' investigation of Assurant found a pattern of questionably denied claims and cancelled policies — and what a South Carolina judge called a culture of "secrecy, concealment … and shredded documents."
First, there is not a place in this world that is not struggling to control health costs while providing high-quality, easily accessible care. No one — no one — has a great solution.
But second, whether as a doctor or as a citizen, I would take almost any system — from Medicare-for-all to a private insurance voucher system — over the one we now have. Job-based insurance is bleeding away the viability of American businesses — even doctors complain about the cost of insuring employees. And it has left large numbers of patients without adequate coverage when they need it. In the last two years, for example, 51 percent of Americans surveyed did not fill a prescription or visit a doctor for a known medical issue because of cost.
The candidates' plans aren't ideal, even from my perspective, but each would be a significant improvement over today's situation. Sen. Clinton's Best Practices Institute could save lives and money. Better technology could save lives and reduce cost while making the experience of being a patient more bearable. America's children would be fully insured and more Americans would have coverage under each of these plans. [...]
Here's how health reform could die: The Republican presidential candidates have remained silent on the topic for the most part. Come election season, the Democrats will have offered detailed plans that the GOP can then fire shots at each proposal in a leisurely manner. (They, of course, will offer no competing plans of their own. That gives them the luxury of criticizing the solution without addressing the problem.) Meanwhile the New Naders will be blasting the same plans from the right, which could rob them of much-needed support from the Democratic base.
Two possible scenarios could result: In the first scenario GOP campaign donors, 527s, and insurance companies, coordinate a campaign that paints the Democratic nominee's plan a disaster for small employers, the self-employed, and the middle class. Outcome: The Democrats lose the White House and suffer setbacks in Congress.
Now, the growing list of Democratic presidential candidates calling for universal, cheaper coverage -- Illinois Sen. Barack Obama yesterday became the latest -- suggests the days of health-care incrementalism are over. Nor are these Democrats alone in embracing the once-toxic political cause of universal care: The best-known state models have been championed by Republican governors, including Mitt Romney of Massachusetts, who is now running for president.
This shift reflects rising and inflation-topping out-of-pocket costs for health care and insurance premiums, co-payments and deductibles. Also, the number of uninsured has spiked to about 45 million, from 37 million when Mr. Clinton was president. Business leaders increasingly are seeking a government-imposed solution, saying employee health costs put them at a disadvantage with foreign competitors.
Those forces, in turn, have combined to embolden politicians in both parties to once again propose universal health care that inevitably would mean a big role for government -- and possibly upend the powerful insurance, medical and pharmaceutical industries.
Everyone needs to realize that if you are an IBM'er in North America.. you have a target on your back. Quality is not the answer anymore, if you work on an outsourcing contract, you know this all too well. IBM is over as far as the outsourcing (SO & ITD) goes...get prepared so when you are ra'd, you're expecting it, unlike me who wasn't.
If you're prepared, it will be a nice reward as you will cash out versus leaving without getting paid. Make this work for you. Take the culture that WAS IBM to your new company, start it there. The best part is IBM is shooting itself in the foot. All of these folks that IBM is screwing over are going into roles with competitors and in position to cost IBM money...remember what they have done to you and your fellow ibm'er...always remember -Sore Sphincter-
Just look at what they are doing to the IBM'ers with the pensions.. These folks have given their lives to IBM only to be screwed over.. I don't want to work for a company like that...that alone sealed my choice.. Its over.
Our IBM'er culture will need to be taken to another company. I wish all of those affected in the last few days the best of luck.. Please remember that you are not alone.. this is like a death in the family.. first its the shock and fear, then grief, anger.. Then the clouds start to part.. you have a whole new opportunity to work for someone else doing the same or something else.. we are not valued.. no raises why we have had record profits .. sam getting millions in bonuses.. I feel for those left..
60 to 70 hours will now be the minimum.. sweating over the fear of losing your job.. target on your back. YOU DESERVE BETTER. F sam and the upper management back stabbers. Its nice to see managers and 2nd line affected now.. there is zero loyalty from IBM management now.. think of how that will affect morale.. Get ready for some paltry raise and news that's its over.. that's BS. Read the proposals from the last stock holders meeting.. something big is up -Sore Sphincter-
I am bailing as soon as I find something. Active job search starts next week. I am not waiting for the severance. I figure it will get reduced soon anyway. In the meantime, I plan on putting in the bare minimum in OT. I think that everyone of us that is left needs to do this. The only thing that has been keeping this company floating is the sheer effort of the employees on the front lines. Let the process fall apart. No more 60 to 70 hour weeks.
Apply Lean to your own life. Cut out the excess work. Your customer, IBM, is only paying you for 40 hours a week. So, if you follow the Lean principles then they should only get 40 hours worth of work. Not 41 hours. Definitely not 50 plus hours. I am not saying to do anything unethical such as walk out of Sev1\'s or ignore your pager while on duty. But you sure can bail out of work at the end of the day, leave your pager at home while you are not on duty, and turn off Sametime and not answer your phone 30 minutes before you leave.
Anyone hassles you then use Work/Life Balance as an excuse. Let us face it. They have been out of legitimate PBC 3's and 4's for some time. They are creating them now for an excuse to let someone go. It is only a matter of time. Save your strength for your next employer who will hopefully appreciate it. To everyone that has been laid off I wish you the best. Hope to see you in the next company I work for. -Missed again-
Mostly feeling like a step-child because they gravitated toward the people they knew and had under them already. No leadership, no information, everything always hush hush and US vs THEM atmosphere. There was some help along the way with the diamonds in the rough managers, but all in all, the ones who tried to be helpful had to put up with a lot of pushback from 2nd and 3rd line mgrs. WHY? because they didn't know any of us or what we did day to day AND didn't care. They just look at spreadsheets and have teleconferences. I have a lot of anxiety and stress right now. BUT, please don't feel sorry for me. I have been miserable at IBM for years now. Always hoping things might get better, but they just kept getting worse. The scientists in IBM research are the only reason IBM still exists. and I don't want to hear. "Well that stuff had to get marketed and sold blah blah blah." Unscrupulous salesman and marketing people are a dime a dozen. Brilliant scientists are rare and IBM has plenty of them.
Quick story: About 1 or 2 years into my employment at IBM, I had a blind date. She was an office manager of a big electrical supplier in the Bronx. When I told her I worked for IBM, she started blasting me and IBM. I mean, she was foaming at the mouth. People started to look over at us. IBM was their IT company, completely dropping the ball, giving her and the company the run around. Needless to say, there was no second date.
I'm not upset because I got laid off. In fact, I'm kinda elated to get a package and unemployment and try to start my own business. What I am upset about is the way I have been treated overall during my years at IBM as I mentioned above. The arrogance and ego's floating around IBM is sickening. Hypocrisy and mean spirits. I was often spoken down to and insulted by many fellow employees I was trying to service. Those same people always abusing and trying to work around the system. Working around the system skews numbers and alters reality. Especially when our head count depended on the "numbers". BUT, I did make some friends and there are many nice people at IBM.
We would watch the IBM helicopter land at our site with Lou, or Sam or whoever and reasonably estimated the cost at thousands of dollars for that trip, when it was only a 10-15 minute car drive from Armonk. Heck, take a limo. It would still be much cheaper. But I guess toolin around in a chopper makes y'all feel way more important doesnt it? And my manager can't get reimbursed to buy us pizza once a year. I wish all my friends still working at IBM the best of luck. AND yes, I wish IBM research the best of luck because they do some incredible things in this world.
Well, I said my peace. I got it off my chest. Now I have to go work on my new journey in life. And in the end, life/happiness is a journey, not a destination. -Itrainedpradeepgupta-
Vault's IBM Business Consulting Services message board is a popular hangout for IBM BCS employees, including many employees acquired from PwC. A few sample posts follow:
Americans SHOULD generally be pleased that the rest of the world -- especially the "emerging markets" -- are starting to catch up. We are the deliberate creators of some of the mechanisms that the emerging countries are now latching onto to pull themselves up.
The problem is in the smoothness of any required labor and capital rearrangements. And here IBM has been spectacularly inept. No one can argue that instead of true global labor integration, we have a mad and unseemly scramble for the ephemeral benefits of labor arbitrage.
What with all the harrumping about "IBM Values," I would expect a little more straightforward and honest communication with IBMers in the US (and anywhere else) about what is going to change. But there is no communication -- not even in reaction to almost hysterical commentary by industry observers like Cringely.
If you read my previous posts concerning Indians, I do hope you find no racism -- but just deep skepticism that IBM's global resourcing strategy is sound. IBM's employees, customers, and business will be harmed along the way.
I don't pick on Indians - I denigrate IBM for building the offshore model. If we were offshoring to some other country where the resources were ignorant about business, challenged with communication, and culturally unable to provide customer service naturally and as a matter of course, I would be talking about them instead. The ire is completely directed at IBM for abandoning the blue chip functionally literate resource model in its g-B-s staffing strategy. [...]
So you can continue to think that I am part of the problem, but history will look back and say that those that pointed the finger at IBM's leadership and HR decisions over the last decade or more have been much more a part of the solution. The opportunity for offshore labor to cash in on this labor arbitrage is only a small component of a much larger picture. It doesn’t deserve much of my attention, nor yours, and only gets my attention when I read something stupid here that challenges the reality of the situation.
Unconventional Road - need a combination of these to be effective:
Today's highly compensated executives face many difficulties, including figuring out how they can possibly spend all of the rich rewards they've earned on the backs of ordinary workers. Take a look at the insider trading of many of our IBM executives—spending the cash from all that stock "acquired at $0 per share" must be a real challenge! Or, imagine the difficulty IBM CEO Sam Palmisano will face spending his $10,000 to $20,000 a day pension when he retires!
As a way of helping out our beleaguered, modern-day robber barons this site will periodically feature "spending opportunities" that the "upper crust" of our society may want to take advantage of!
During the course of 19 surveys conducted in 2005, 2006 and 2007, his Redding, Conn., firm, Prince & Associates, asked about 2,500 high net worth individuals what issues were of the greatest concern to them. Survey participants earned their own fortunes, which totaled at least $500,000, with most participants being millionaires many times over. Heirs and heiresses weren't included. [...]
Managing a large fortune composed of liquid and physical assets, scattered in various geographic locations, can be a time-consuming task that's separate from the job of running the business that generated the wealth in the first place, says Amy Braden, head of the Family Wealth Center at J.P. Morgan Private Bank in New York, which serves clients who've amassed fortunes worth more than $25 million.
"There actually is work in overseeing that,'' she says. "People might be surprised about the extent to which wealth can be a burden. It doesn't take care of itself and those who are wealthy and have a sense of responsibility about that wealth, take that responsibility very seriously.'' [...]
Strikingly, what most concerned those polled was not being able to maintain and improve their current status and get ahead. This might come as a surprise because, well, they already are ahead. Overall, 91% call "the luxury lifestyle" a key issue, 94% say the same was true of "the lifestyles of the exceptionally wealthy." These exceed the 81% who say "not being able to meaningfully enhance" their current lifestyle is important, which is about the same level as "making sure your heirs are taken care of."
As Russ Prince describes it, it's the mind set of "I have the $5 million jet. I want the $10 million jet." But he doesn't see it as greed. Rather, he says, it's simply a reflection of what everyone at every income level wants: something more.
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