Big Blue has become the model of how to sell integrated hardware, software and IT services, with the latter two contributing four-fifths of sales, from less than half in 1997. Much of the past decade was spent dealing with the consequences of buying PwC’s consulting arm in 2002 – a culture clash and staff departures coincided with a price war in IT services and the rise of Indian outsourcers. But a mixture of integration, moving staff offshore and improving technology over the past five years has seen real transformation, with gross margins rising by almost 6 percentage points.
The question, however, is how much further profitability can be improved for a company unlikely to grow sales rapidly. IBM can tout the benefits of automating processes that currently require human interaction, and an improving economic environment should also help to improve consulting margins for the next two years. But operating margins of 15 per cent in outsourcing and consulting are already better than its US and European competitors. ...
IBM is counting on acquisitions to drive more of its growth. Mr. Palmisano said IBM would be a more aggressive buyer, spending $20 billion on deals between 2011 and 2015. Recently, IBM had been spending about $3 billion a year on acquisitions. "In five years we will spend more on acquisitions than the previous ten years," the chief executive said. IBM said its acquisition strategy would remain focused on scooping up software companies. Since 2003, IBM said it has acquired 57 software companies for around $13 billion.
The transformation—fueled by an increasingly aggressive streak of small acquisitions—is shaping up to be as significant as the shift from hardware into services engineered by Mr. Palmisano's predecessor, Louis V. Gerstner Jr. "If you think about IBM in 2015, it will be as dramatically different as IBM is today versus 2003," said Mr. Palmisano, who became CEO of IBM in 2002. "More and more of our profit will come out of these higher value segments." ...
IBM has spent the past decade shifting out of crowded technology businesses where companies compete mainly on price. The company sold its PC unit to China's Lenovo Group and moved aggressively into services like building information technology systems. Fast-growing Indian companies such as Wipro Ltd. and Infosys Technologies Ltd., however, have cut into the growth potential of that business.
This would seem to suggest that Big Blue could be infinitely profitable if it would fire everyone. But pushing up to at least $20 in earnings per share is probably as close to infinite profitability as IBM can hope for. ...
Just like IBM changed a lot between 2003 and 2009, Palmisano said that the company would continue to change in the next five years. Software will contribute more than half of IBM's profits, and IBM's growth initiatives - smart infrastructure, analytics, and business optimization, and cloudy infrastructure - will deliver $20bn in revenue growth, and growth markets - such as China, India, and Brazil - will account for a quarter of IBM's sales by 2015 (up from 19 per cent in 2009 from these areas).
Tweaking the company's own structure - meaning offshoring, layoffs, and other changes - will cut out $8bn in costs in the next five years. And when you add it all up, that is $100bn in free cash flow, of which about 70 per cent will be returned to shareholders through share buybacks and dividends. ...
Wall Street is a tough audience, apparently. Maybe they will need to see infinite profitability before they push the stock to $200 a share so Palmisano can do a stock split ahead of his presumed retirement next year, IBM's 100th birthday.
I joined mid career, and me and others like me had the same horrible experience working there. They pay people crap (unless you were lucky like me and negotiated a good starting wage, which they "normalised" over the course of my time there), treat them like shite and make them think they're working at the best company in the world.
It's a company full of bullies (the number of bullying cases they are fighting at any one time is staggering) looking to do nothing but claim other people's work as their own as they climb the ladder and build their little kingdoms or fiefdoms.
There's a lot of cache with IBM, but working there was the worst experience of my work life. Great on the CV, but so effing glad it's over.
The executives should be ashamed of themselves, but they're not. Shame on You, Sam!!! I have a feeling Bob Moffat was the tip of the iceberg in regards to under-handed actions.
The only place it hurts is in billable/customer arena, where valuable resources are leaving and IBM has a hard time finding qualified replacements (the only ones they get are IBM India resources 'transferring over' and a sprinkling of professional hires (University graduates want NOTHING to do with this company and who can blame them). Execs are finally realizing it pays to 'retrain' current employees in the hot areas and assign them to understaffed customer accounts. Finding Global Resources is becoming difficult too to staff these projects. The poor Resource Deployment Mgrs. are getting beat up daily because they can't staff project (and WHY is it there fault?)
We need a clean sweep of the top layer of execs - a total restaffing or we will continue to see the horrible death spasms of the U.S. IBM Corporation. Another Resource Action in June? Sure, bring it on, bitches!!!!! Tom Watson is truly rolling over in his grave.
I do CICS and MQSeries systems programming on a z/OS platform, but in India those are two separate functions in two different places in the country, the CICS group in Bangalore and the MQ group in Chennai. My CICS replacement is 25 years old and only started with IBM this January! The MQ is about the same age and flatly says he knows nothing about the mainframe environment, and has only ever worked on linux and unix.
These folks come over here and we have the TEACH them how to logon to TSO? And yet they are learning enough in a month to replace us? The MQ guy tells me IBM India is absolutely desperate to find people with MQ mainframe skills and can't find them anywhere, even though they are willing to pay just about anything. But clearly not enough to continue to pay my salary. :-)
Anthem could have spread its losses more broadly to protect its individual buyers. The only reason the company lost money on the individual market is that it lost heavily on policies issued to participants in two state programs that required Anthem to cover people with pre-existing conditions and capped the premiums it could charge. It chose to offset further losses by imposing big hikes on other individual purchasers. For competitive reasons, it is unwilling to pass the costs on to employer-based group plans.
"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 banks are also eager to preserve their ability to take huge risks. They are making an especially intense push to strike a provision that could force big banks to spin off the lucrative business of derivatives trading. That provision is necessary, in no small part because incremental efforts in the bill to regulate derivatives are in grave danger of being watered down. ...
Banks and their Senate supporters also want federal backing — such as access to lending from the Federal Reserve — for exchanges and clearinghouses that would take on derivatives trades in a reformed system. If investors knew that the federal government stood behind the transactions, it would be easier for banks to enter into highly risky transactions. That ultimately could put taxpayers back on the hook.
Obama declared that his proposed financial reforms are "in the best interest of the financial sector." Honchos of Goldman Sachs, JPMorgan Chase and the other giants broke out in big grins at this, because they knew it meant that Obama was merely going to "regulate" excess, not restructure the financial oligopolies that inevitably produce the excesses. Bankers hire scads of lawyers and lobbyists so they can easily slip out of regulations, but restructuring actually limits the harm they can do to us.
Not that Obama's regulatory steps are bad – most are obviously needed and long overdue. But the reform that really matters is to cut these behemoths down to size. Banks should not also be in the casino gambling business, houses of global speculation should not be in insurance, and insurance giants should not be tied to banks. More fundamentally, financial outfits that are too big to fail are too big. Period. They should be broken up so they don't threaten our economy, and their assets should be decentralized into community banks, credit unions, and other lending institutions that actually serve our economy.
Actually GE paid less than a fraction. Even though the corporation had income totaling more than $10 billion, it paid nothing into our national treasury on April 15. Indeed, it paid less than zero, for it is getting a billion dollar tax rebate!
This is due to a loophole called "transfer pricing" – a bit of accounting hocus pocus that transfers corporate profits to subsidiaries in low-tax countries abroad, while ascribing GE's expenses to operations here. Incredibly, one General Electric subsidiary posted a $6.5 billion loss in the U.S. last year but showed a $4.3 billion profit overseas. Overall, GE has $84 billion parked indefinitely in offshore accounts, thus dodging its fair share of taxes needed for the upkeep of our nation.
President Obama is calling for repeal of this overseas tax dodge, and of course the tax dodgers are howling. One corporate-funded front group, The Tax Foundation, even claims that, "The average Joe should be in favor of lower corporate taxes." Why? Because, says a spokesman, by avoiding taxes, outfits like GE can raise wages and lower consumer prices.
Huh? Is he stupid enough to think we're that stupid? Corporate chieftains are slashing wages, moving our jobs to cheap-labor countries, and raising consumer prices as fast as they can – while pocketing outrageous salaries and fat profits. Let's at least make them pay their tax bills, like the rest of us Americans do.
Secret #1 is that Wall Street has radically and abruptly shifted its function. Rather than being the financier of productive business enterprises, it is now a global gambling house for the superrich, as Abacus proves.
A hedge fund huckster named John Paulson had scoured mortgage records to find home loans that he was sure would be foreclosed. He then got Goldman to pool these shaky mortgages into Abacus and sell the package on the premise that it would actually increase in value. Paulson paid $15 million to Goldman to market Abacus.
Investors were not told that Paulson had hand-selected these doomed mortgages and had made a side bet that they would fail. Investors lost $1 billion, Paulson made a billion, and Goldman cashed in, too.
Abacus was a casino game, pure and simple – and that's what Wall Street has become.
Secret # 2: The media reported that Paulson "earned" a billion bucks in this deal. But he did not. He grabbed, snookered, absconded with, and otherwise hauled off a billion – but "earned" implies meriting something. For example, America's teacher-of-the-year certainly earns a paycheck of $40,000, but Paulson is a snake who did nothing to deserve his billion-dollar haul.
You see, when a corporation's former workers are denied jobless benefits, the corporation pays less in taxes to our nation's unemployment fund. However, denying benefits is a messy process, and it's not a plus for the corporate image. So – voila! – Talx comes in to do the dirty chore.
Talx has become notorious in state unemployment offices across the country, for it routinely flings tons of paper at the process in order to clog it and game it, thus denying or stalling benefits that laid-off people are due. Stalling a case is often enough, for many jobless folks don't have the resources or time to battle a deep-pocket opponent like Talx, so they give up.
Lying seems to be another Talx weapon. A recent New York Times report cites several examples, including the case of a mentally-disabled man fired from his job as a night janitor in a New Hampshire Walmart. Talx stalled for three months before the fellow could even get a hearing. The hearing officer granted benefits to the jobless janitor, but Talx appealed, claiming that Walmart had requested to testify by phone but was not allowed to. There was, however, no such request. Finally, the janitor won the appeal – but, thanks to the Talx long stall, he had no money for rent and lost his apartment. "That was a nightmare," he says of his experience.
Talx officials say the company improves the "efficiency" of the unemployment system. Actually, it doesn't – but worse, Talx strips human decency from the system.
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