It's too bad we have to ask each other what may be in store for us in the future, while IBM has the answers on their fingertips, but will not share it with us anymore on a personal level. We went from an asset to a liability to IBM when we retired, but we still have feelings and needs like anyone else. I certainly thank those who share what information they can scrape up.
The board declared a dividend of 65 cents per share on IBM's stock while also authorizing the company to spend an additional $10bn to take them off the market and "return value to shareholders" — the IBM euphemism for not giving employees a pay raise.
IBM has $2.3bn remaining in prior authorizations to buy back its own shares from the open market. That's a pretty big pile of cash to throw at stock to artificially boost earnings per share (EPS), as many companies do, especially when you consider that IBM has only $11.1bn in cash and marketable securities on hand as of the end of September, and that it has $27.5bn in debt. ...
It is not clear where IBM has its cash stored, but given that IBM doesn't touch it and that it even went so far as to borrow money to do a massive buyback a few years ago, you have to believe that a large portion of it is locked up in overseas subsidiaries where Uncle Sam's tax hounds can't feast upon it.
And thus, IBM has been burning through the cash it generates each quarter to satisfy its share-buyback habit. IBM has generated $12.7bn in cash from operations in the first nine months of the year, and thus far has spent $11.8bn on its shares and another $2.37bn on dividends in those three quarters.
This from a CEO who balked last year at the $5.6bn net-of-cash price for Sun Microsystems, and who admits that the acquisition has made Oracle the biggest headache IBM faces in its future. ...
With IBM's shares trading at an all-time high (and one would argue from that relatively rosy five-year plan), one might argue that stock buybacks are the worst possible way to return value to shareholders. Building businesses that are profitable is tough, and to one way of thinking about it, IBM really screwed up by getting out of the hardware business (except in data centers), and missed the entire consumer IT revolution that's now underway. Apple generates almost as much revenues as IBM at this point, throws off more cash each quarter, and is on a steadily rising wave of consumer enthusiasm for its products.
The IBM that Larry Ellison says he admires is the one run by Tom Watson Jr — the one that hated Wall Street. That company only went to the Street to borrow money because the revolutionary System/360 mainframe line that defined corporate computing, launched in 1964, needed $5bn in investment to create — and that was at a time when IBM's annual sales were $3bn. ...
Share buybacks are what companies do when their stock is in the gutter because their business is on the rocks, and when they have a lot of cash sitting around. It is what companies do when they can't figure out what else to do to feed the Wall Street beast. Perhaps the answer is to let it starve and instead go and create great technology.
I guess the third way is to invest in the business to come up with new stuff to sell, thereby growing the business long term. On that measure, Apple and IBM had about the same revenue last quarter. Apple spent 464 million on R&D, IBM 1.4 billion. I guess it is cheaper to invest in shiny.
There's only so much manipulation the market will take before it says, "Sorry we're not playing any more," and the stock tanks. Restrict the supply of shares too much; and you reach a tipping point where the market judges you to be over-valued. With an IBM where costs are cut to the bone and (certainly in my area) R&D is being hampered, this is a real concern.
Now I think that selling off the PC business and the hard disk business were the right thing to do, but they (upper management) haven't been able to replace the revenue with organic growth. Sure IBM have been buying up lots and lots of smaller software companies and a few hw companies, to increase revenue that way. But IMHO that has been kind of defensibly. They haven't been doing gutsy "expand the business into a new market" kind of buys.
HP has by buying EDS, Oracle have bought SUN, SAP have bought Sybase...
And to be honest I think that the investors would rather have seen IBM use the 10 billions on entering or re-entering a marked, rather than pumping up the stock. I mean double the 10 billions and IBM could have bought Juniper networks. That would have been a strategic move, with CISCO entering the server market.
This buying up stocks is top management trying to force the stock up high enough so that they can make a stock split, that normally also will benefit the stock. It's the same problem with companies around the world, upper management isn't thinking about what is best for the company but what is best for their stock options.
It rubs you up the wrong way after a bit. Why should they spend 10 billion on shares when I could do with a new laptop and haven't had a decent raise for a couple of years due to the company moaning about hardship?
Not that good people leaving really bothers big blue, they'll just buy in more. In fact I think that's the plan - buy products, sell them for all they're worth but put as little investment into them as possible, watch people leave and the product stagnate. Buy another one, repeat. Anonymous posting for pretty obvious reasons.
IBM is treating their employees like crap because they can. Go ahead and leave. They will replace you with an offshore resource, if they can, or they'll hire in someone more desperate for a job that has a pulse. Since you left, they don't have to worry about giving you a package as you exit, where they would if they made you redundant.
The problem with share buybacks is that its an artificial pop in price. But if the street doesn't buy it, then your share prices will still take a hit. (A double screw to the employee who didn't get a bonus and holds IBM stock.)
As to IBM's mystery source of money... its out there... where the US Tax Man can't get it. IBM is run by bean counters and they will play accounting tricks when they can.
*because they only buy shares back when they're undervalued, and it's the employees who pay tax on the options, if they (the options) aren't in the toilet as usual.
Instead of stock buybacks (and this one is curious since IBM stock is near an all time high), rampant cost cutting and RAs, little, if any raises, for the employees, and unable to truly innovate and create new trend setting products like Apple can, wouldn't a better use of this buyback money be to truly invest and grow in the core business and the people who run and produce the products and services with it instead to get a leg up on the competition?
That latter statement is not good. ...
This move smells like a desperation move to keep EPS where it is (or "meet expectations") into declining actual earnings in nominal dollar terms.
Selected reader comments follow:
Mr. Dietz's situation may be extreme, but many people are facing a similar dilemma: over 50, unemployed and running out of options. With no job prospects long before they can afford to retire -- and Social Security benefits still years away -- many unemployed workers in their 50s and early 60s are struggling to pay the bills, the mortgage, health-care expenses and college tuition. It's a scenario that was unimaginable to many just a few years ago.
Of the 14.9 million unemployed, more than 2.2 million are 55 or older, according to the U.S. Labor Department. And almost half of those have been unemployed six months or longer. The unemployment rate in that age group is a record high 7.3%.
So how should companies manage and protect their secrets and reputations in today's social media world? They should take a multifaceted approach--not simply churn out lawsuits and pink slips. ...
Have a genuine open-door policy. Companies with strong ethical cultures make sure their employees feel comfortable raising concerns and grievances without fear of retribution. If you have such a policy, it is important that you always follow up and let employees know what action or resolution is taken when a concern has been raised. Otherwise your open-door policy will seem hollow and fall into disuse. ...
Listen and monitor. An ethical company always treats its employees fairly, and the best way to stop anonymous employee Internet critics is by depriving them of reasons to complain in the first place. You do that by providing a fair, respectful working environment and a meritocracy. Naturally there will be outliers in any organization who will complain no matter what, but absent an obvious pattern, such criticisms should be taken lightly or ignored by other stakeholders, such as current and future employers, customers and partners. Should a pattern of broad and consistent criticism emerge, however, companies can ignore it only at their own peril.
You are wrong about one thing. Quality does not matter. It's the perception of quality, what they can make customers believe and buy into that matters. What you need at IBM now are good powerpoint skills and the ability to pinpoint who has the power, and the lack of spine that is necessary to agree with them (lest they crush you).
There is a serious degradation in quality. Most people are doing precisely what is needed to keep their jobs. Make no mistake it is no longer a career but a job. The only jobs left that are NOT in third world countries will be: SALES - PROJECT MANAGERS - and EXECUTIVES. Every other job has been divided and categorized into a massive "jobs" schema.
Alliance reply: We suggest that the most constructive way to changes things for the better is to organize and negotiate a contract. Working conditions in IBM are such because workers have no say and no power. That can be changed. The Argentina IBMers understood that and formed a union. And yes we do care about what is happening to contractors.
"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.
It's true that the White House is pushing big spending items, not least of which is his multitrillion-dollar scheme for government-run health care. But many critics, either out of ignorance or malice, are blaming Obama for deficits that are not his fault.
Some Republicans, for instance, complain that Obama tripled the budget deficit in his first year. This assertion is understandable, since the deficit jumped from about $450 billion in 2008 to $1.4 trillion in 2009. As this chart illustrates, with the Bush years in green, it appears as if Obama's policies have led to an explosion of debt. But there is one rather important detail that makes a big difference. The chart is based on the assumption that the current administration should be blamed for the 2009 fiscal year.
But there is one rather important detail that makes a big difference. The chart is based on the assumption that the current administration should be blamed for the 2009 fiscal year. While this might make sense to a casual observer, it is largely untrue. The 2009 fiscal year began Oct. 1, 2008, nearly four months before Obama took office. The budget for the entire fiscal year was largely set in place while President Bush was in the White House.
So if we update the chart to show the Bush fiscal years in green, we can see that Obama is mostly right in claiming that he inherited a mess. ...
So what's the final score? Let's use an analogy. Obama's FY2009 performance is like a relief pitcher who enters a game in the fourth inning trailing 19-0 and allows another run to score. The extra run is nothing to cheer about, of course, but fans should be far angrier with the starting pitcher.
The relevance of all this to everyone in this country should be clear. Average working people in the US have suffered since the crisis began in 2007 much as their French counterparts did; indeed, it hit harder here than there. The same issues that concern the French (unemployment, precarious jobs, declining benefits, huge government bailouts of the rich and well-connected, etc.) likewise agitate most people here. France's experience suggests the potential in other countries for the parallel emergence there of huge left movements opposing policies that burden average citizens with the costs of capitalism's crisis and of bailouts rewarding the same enterprises that contributed to the crisis. France today suggests that when you further push a population to suffer reduced public payrolls and thus government services (in "austerity" programs to pay for overcoming the crisis), you risk provoking a mass left upheaval into the political, cultural, and ideological life of a country. France will not be the same in the future, no matter how this crisis ends.
The French strikes and demonstrations are coalescing around some basic demands that go far beyond the rejection of Sarkozy's demand for a two-year postponement of retirements for French workers. Contrary to so many US media reports, that particular issue was never what brought out millions of demonstrators and strikers; that was the bare tip of an iceberg. The issue that mobilizes the French is the basic question of who is to pay for (1) the collapse of global capitalism in 2008 and 2009, (2) the ongoing social and personal costs of high unemployment, loss of homes, reduction of job benefits, and the general assault on most citizens' standards of living, and (3) the costs of ending the crisis. The French masses have already absorbed and suffered the costs of (1) and (2). They have drawn the line at (3). That they now refuse.
Instead, they demand that the costs of fixing capitalism's crisis be borne chiefly by taxes on the banks, large corporations, and the wealthy. Those groups are declared to be (1) those most able to pay, (2) those who benefited most from speculations and stock market booms before the crisis began in 2007, (3) those whose investment and business activities were key causes of the crisis, and (4) those who got the biggest, earliest bailouts from governments subservient to them.
Under Ryan's plan, the report showed that by 2080, the benefit of a medium earner, about $43,000 in 2010, would be 46 percent below today’s wage-indexed amount; the benefit of a higher earner, $69,000, would be 56 percent lower; and the benefit of someone who earns the maximum taxable amount, $106,800, would be 61 percent lower. The reductions include a 7 percent cut in benefits resulting from the increase in the full retirement age that is already scheduled in law. The average Social Security benefits are $14,000 a year for retirees.
This site is designed to allow IBM Employees to communicate and share methods of protecting their rights through the establishment of an IBM Employees Labor Union. Section 8(a)(1) of the National Labor Relations Act states it is a violation for Employers to spy on union gatherings, or pretend to spy. For the purpose of the National Labor Relations Act, notice is given that this site and all of its content, messages, communications, or other content is considered to be a union gathering.