Presently, the corporation is chopping some 5,000 more jobs in New York State – apparently sending the work abroad. IBM seems blind to the injury this causes in its own community. But injury turned to insult when the community learned that the company took $45 million from state taxpayers just last summer in exchange for a promise to keep jobs in New York. This double cross caused an uproar, but the company's top executives are tone deaf to public sentiment. In March, they heaped more insult on the American people – at the same time they were lobbying to get a chunk of federal stimulus money from us taxpayers, they submitted a patent application on a new computer system designed to help corporations send more American jobs overseas.
Could they possibly get any more stupid? Yes! IBM is now offering new job opportunities for workers being displaced. The only catch is they have to move to China, Slovakia, India or wherever their old job was sent. What a deal – you can keep your offshored job, but you have to offshore yourself! Oh – and you also have to work for the low, low, low local wage rate.
Why should our tax dollars finance such stupidity? Rep. John Hall and others are sponsoring HR 1874, the Patriot Corporations of America Act, to support companies that do not abandon our country and our communities. For information, call Hall's office: 202-225-5441.
Using Debt to fund Buybacks and Dividends. It was just last October that IBM raised $4 billion from bond sales. They paid a fairly high price too, with yields ranging from 6.5% for the 5 year bond, to 8% for the 30 year bond (details here). Now they announce a $3 billion share repurchase, and a boost to the dividend?
Layoffs Too? Official numbers are hard to find, but it appears that IBM has laid off up to 10,000 workers in North America this year. Public companies have a responsibility to shareholders to maximize ROI. At times that requires getting rid of some dead wood. But is it really prudent to lay off 10% of your U.S. workforce, while ramping up spending on share buybacks and dividends? That must be horrible for employee morale and loyalty.
I can’t think of a better way to describe IBM’s strategy here than “jacking up the dividend, then doing a big ol’ share buyback to lure in longs and scare off shorts, resulting in a short-term pop in our stock. Yes, we have a bunch of liabilities that we should probably pay off first, but we’ll deal with that later“. Hmm, that doesn’t exactly roll off the tongue. Maybe if The Treasury Dept was in charge of naming it, they’d give us a catchy acronym like JUDDBSBLLSSRSTPOSYWHBL...
Will the buybacks, layoffs, and dividends that IBM purchased be worth the cost? I’m skeptical to say the least. They may succeed in temporarily juicing the stock, which is probably what management wants to happen. That allows for bonuses and profits from employee stock options. But will these moves be good for IBM 10 years down the road? I highly doubt it.
Sketchy moves like this buyback should discourage investors from buying IBM. Wall St, however, was predictably impressed. The logic must have been along these lines, “yield good, money good, earnings good. buy ibm.” I haven't seen any concern about their balance sheet mentioned. There are so many better companies to own other than IBM, I don’t get it. Among other tech companies, I’d take Apple (AAPL) over IBM any day, even at current valuations. ...
Back to IBM’s balance sheet. It certainly isn’t as bad as GE’s, but it ain’t pretty either. The announcement Tuesday may give IBM shares a temporary boost and scare off potential shorts. But in the long run it will degrade their balance sheet further, and reinforce the cycle of debt. Here are some highlights from their Q1 2009 balance sheet:
The last bullet-point is the most concerning. It means that IBM's current ratio is only 1.18x, which indicates that their short-term liquidity situation isn't great. In our current economic environment, why are they scraping by with minimal liquidity, and simultaneously increasing the dividend and instituting a $3b share-buyback? They could be putting that money towards paying off their substantial total debt of $30.9b. Instead, it seems they plan to keep re-financing and rolling debt over for eternity. Who knows, they might be forced to sell back those repurchased shares much lower eventually (GE was forced to sell shares at a ~20 year low, after huge buybacks at much higher prices).
The bill, the Healthy Families Act, would be binding on employers that had 15 or more workers. It would guarantee employees one paid hour off for each 30 hours worked, enabling them to earn up to seven paid sick days a year. They would be entitled to claim their days when they or a child, a parent, a spouse or someone else close to them became ill. ...
The legislation’s preamble notes that nearly half of private-sector workers and three-fourths of low-wage workers do not receive paid sick days. Far too often, advocates say, such employees feel compelled to go to work even when ill, because they fear being fired or at the least losing the day’s pay. Ms. DeLauro recalled that at a meeting with wives of men serving in Iraq, one of them complained that her employer had threatened to fire her because she took two days off when her child was ill.
“The majority of plan sponsors wants to terminate their frozen plans quickly, but doesn’t have sufficient assets to do so,” says Cecil Hemingway, U.S. retirement practice leader at Aon. “Survey participants told us they made the design changes associated with closing their pension plans (soft freeze) or ending future benefit accruals (hard freeze). However, without addressing the investment paradigm, they are leaving themselves open to significant future risk,” he adds.
Revenue and dividends are going only to the investors, and year after year more bonuses are going to IBM managers. This is having a negative affect on the morale of IBM employees. Bonuses to corporate management are under scrutiny by President Barack Obama’s administration. Management bonuses are also under the control of Sam Palmisano, our CEO and Corporate Social Responsibility offices. We will no longer accept these excessive benefits to IBM managers. We ask IBM to reinvest money in the direction of IBM workers (main stakeholders of this company), and especially to the employees that have not received salary increases for 7 or 10 years. On top of this many education course are cut due to low funds.
Find a place that will provide you with meaningful work and will treat you decently. If it's not very meaningful, make sure you get compensated well working for some other corporate behemoth. Scary, but when has the world ever had certainties? Speaking of certainties, last I checked there is no legal guarantee for IBMers of a severance package... -sector7g-
But if a U. S. worker loses his or her job, the family faces financial ruin if sickness strikes any member because they are without health-care coverage. Bridge coverage is available but unaffordable for anyone but the wealthy.
Worse yet, if a major illness is diagnosed during unemployment, a workers becomes unemployable, bringing on a life sentence of poverty.
Little wonder, then, that consumer spending has ground to halt in the United States, which makes the economic meltdown that much harder to combat or ever solve.
This underscores the fact universal health care is not just smart and fair social policy but also smart economic policy. But this fact may get lost in the shuffle as the vested interests in the lousy health-care system in the United States start their propaganda.
In fact, there are so many economic advantages to universal health care that it's puzzling why the Republicans, conservatives and business interests haven't been pushing for it. Here's are the economic advantages to decent, universal health care:
Canada has a better health-care system than does the United States. Even developing nations, such as Ecuador or Mexico, look after the basic needs of their populations better than the United States looks after its citizens.
As an American living in Canada, I find it embarrassing that the United States -- rich and smart --has such a mediocre health-care system.
I find it embarrassing that even educated and financially astute Americans buy the lies that the AMA and others spew about Canada and other "socialized" medical schemes.
Facts are that governments in the United States are suckers. They cover the high-risk populations --indigent, elderly and veterans -- and leave the gravy to the private-sector health insurers. These companies, by the way, make profits off their operations that are the same size as Canada's entire health-care tab for 32 million people
It's pretty shameful, but delusions persist and the medical myth-makers are girding for battle. But Americans are capable of skepticism and deep down most realize their health-care system is sick, maybe terminal, and needs treatment as soon as possible.
On Monday, just a week after the White House photo-op, The Washington Post reported that Blue Cross Blue Shield of North Carolina was preparing to run a series of ads attacking the public option. The planning for this ad campaign must have begun quite some time ago.
The Post has the storyboards for the ads, and they read just like the infamous Harry and Louise ads that helped kill health care reform in 1993. Troubled Americans are shown being denied their choice of doctor, or forced to wait months for appointments, by faceless government bureaucrats. It’s a scary image that might make some sense if private health insurance — which these days comes primarily via HMOs — offered all of us free choice of doctors, with no wait for medical procedures. But my health plan isn’t like that. Is yours?
“We can do a lot better than a government-run health care system,” says a voice-over in one of the ads. To which the obvious response is, if that’s true, why don’t you? Why deny Americans the chance to reject government insurance if it’s really that bad?
For none of the reform proposals currently on the table would force people into a government-run insurance plan. At most they would offer Americans the choice of buying into such a plan.
And the goal of the insurers is to deny Americans that choice. They fear that many people would prefer a government plan to dealing with private insurance companies that, in the real world as opposed to the world of their ads, are more bureaucratic than any government agency, routinely deny clients their choice of doctor, and often refuse to pay for care. ...
The medical-industrial complex has called the president’s bluff. It polished its image by showing up at the big table and promising cooperation, then promptly went back to doing all it can to block real change. The insurers and the drug companies are, in effect, betting that Mr. Obama will be afraid to call them out on their duplicity. It’s up to Mr. Obama to prove them wrong.
"But dependency on government has never been bad for the rich. The pretense of the laissez-faire people is that only the poor are dependent on government, while the rich take care of themselves. This argument manages to ignore all of modern history, which shows a consistent record of laissez-faire for the poor, but enormous government intervention for the rich." From Economic Justice: The American Class System, from the book Declarations of Independence by Howard Zinn.
The growing legions of the unemployed can be forgiven for not shouting hallelujah. It’s a little like watching the drunken driver who plowed into your family car and caused untold havoc and heartache, suddenly pulling up one morning, no worse for the wear, in a sparkling new vehicle.
The folks who led the nation to this financial abyss are the ones being made whole on the taxpayers’ dime. We can look after them, all right. But we can’t seem to get credit flowing in any normal way again; we can’t stanch the terrible flow of home foreclosures; and we’re not doing nearly enough to address the most critical need of all: putting people back to work. ...
“With the erosion of social and corporate safety nets, tightening credit and declining home equity, most Americans have little financial cushioning to survive a job loss. Without a steady paycheck, 50 percent of Americans say they could not meet their financial obligations for more than a month — and, of that, a disturbing 28 percent couldn’t support themselves for more than two weeks of unemployment.” ...
The financial industry is seen as essential, but millions of American workers are not. They’re expendable. If as much attention, energy and resources were given to the effort to put Americans back to work as has been given to putting the banking industry back on its feet, you’d have fewer Champagne toasts on Wall Street but a lot more high-fiving in family homes across the country.
It’s also wishful thinking to expect the industry to regulate itself. Banks may be penitent for the moment, and some have voluntarily revised pay programs to reduce incentives for excessive risk-taking. But the contrition won’t last, so it’s only reasonable for authorities in the United States and elsewhere to try to address these flaws.
The right approach is to set sensible rules that govern broad, structural aspects of compensation. This means requiring incentive pay to have a heavy equity component and barring bankers from gaining access to such holdings for years. Very large annual bonuses should also be subject to so-called clawbacks in future years.
Vault's IBM Business Consulting Services message board is a popular hangout for IBM BCS employees, including many employees acquired from PwC. Some sample posts follow:
Assuming the 7% drop, revenue in 2009 would drop from $103.6b to $96.3b. But to keep an EPS of $9.10, gross expense (revenue - earnings) would have to drop from $91.5b to $84.7b (I assumed a buyback of 75m shares, typical for recent years, but the calculation is not too sensitive to share buyback, unless the stock involved back is truly h46217527uge.)
So in effect, IBM is predicting a huge decrease in gross expense. But $6.8b? Not even huge US layoffs much larger than what we have seen so far would save that kind of money in 2009. Fantastic jumps in software and services margins? Doubtful to me. Can somebody show me how to pull this rabbit out of the hat?
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