Chief Financial Officer Martin Schroeter told analysts after the results that the company will take a "workforce re-balancing" charge of about $1 billion this year, roughly in line with what it did in 2013. ...
IBM typically re-balances its giant workforce every year, but the job cuts in 2013 and the reductions coming in 2014 are a bit bigger than in the past because the company has been struggling with weak revenue growth, the analyst explained.
It costs IBM about $70,000 to lay an employee off, so if the latest re-organization is mostly related to staff reductions, that suggests the company may be cutting 10,000 to 15,000 workers, Sacconaghi estimated.
Its lackluster performance in 2013 was marked by a 5% year-over-year decline in revenue (2% in constant currencies) to $99.8 billion. Operating income was up 2% from the prior year to $18 billion, despite a whopping $1.7 billion decline in profit tied to IBM's struggling hardware business. ...
The bad news is that things are going to get worse before they get better, with an anticipated $1 billion workforce action expected in IBM's historically weak first quarter. A similar $1 billion effort in the second quarter of 2013 eliminated 6,500 to 8,000 positions across IBM's massive global workforce of more than 430,000 employees. ...
True to form, IBM once again promised higher earnings per share for the year ahead, with a target of $18 for 2014. Meeting that longstanding goal of $20 per share by 2015 would certainly please investors, but IBM competes in an industry in which vendors don't always put investors ahead of their position in the industry. SAP on Tuesday rolled back profit expectations so it could grow more aggressively in the cloud. Meanwhile, cloud pure-plays like Salesforce.com and Workday routinely run in the red, keeping investors at bay with strong growth and cash-flow figures and the promise of a long-term payoff.
The Alliance@IBM, a union-sponsored workers group, said the downsizing was code-named “Apollo” and urged employees to send in resource action packages when they arrive so the actions can be reported. IBM hasn’t issued such details for years.
With the March 31 deadline for open enrollment period fast approaching, state officials have upped their rhetoric. Last week, the Maryland Health Connection cited Cúram and its “serious software defects.” Previously, the state blamed a squabble between two primary contractors as the source for the exchange’s numerous bugs.
Last month, in a December letter to IBM CEO Virginia Rometty, Minnesota Gov. Mark Dayton detailed 21 problems MNsure encountered with Cúram, including applications stuck in pending status, as well as inadequate documentation and duplicate applications. ...
Responding to Maryland’s claims, IBM spokesman Clint Roswell said that the exchange is improving and that IBM is still working with the contractors on the site. “Based on our latest statistics on the exchange’s performance, we are seeing more than 95% of consumers entering the site now having a positive experience,” Mr. Roswell said in an email to CIO Journal. IBM started offering the software when it acquired Dublin, Ireland-based Cúram Software Ltd. in 2011. Cúram means ”care and protection” in Irish.
But an official for Maryland Health Connection told CIO Journal Tuesday that while the exchange’s user experience has improved, “significant issues with the Cúram software and other system components still need to be fixed before the website can function as it should.”
Even if the deal clears those hurdles, Lenovo could still lose some IBM customers in the U.S., though that may be offset by gains in its home market of China, said Stephen Yang, a Hong Kong-based analyst at Sun Hung Kai Financial. “Lenovo may still face some headwinds selling servers to American institutions and corporates due to worries over counterintelligence,” Yang said. “Lenovo would likely focus on growing its China market first, like they’ve always done with any business.”
This earnings per share growth was obviously not driven by operational growth, but by repurchasing shares to drive earnings per share. While IBM has access to roughly $11.1 billion in cash, equivalents and marketable securities, its debt pile has increased to levels just shy of $40 billion. This results in a net debt position of almost $29 billion. Note that this even excludes little over $16 billion in retirement and pension obligations.
Clearly IBM is not happy with the results, with the key executives foregoing the annual incentive payments for the past year. ...
Living In Borrowed Times. Instead of focusing on revenue growth, IBM appears to be fully focused on earnings per share. While operational revenue and earnings growth stalled, the company resorted to share repurchases to drive earnings per share growth. In the period 2010-2012, IBM repurchased $35 billion worth of shares, while paying out little over $10 billion in dividends. This means that payouts were being roughly equal to earnings of $47 billion for the period. Note that this excludes cash being used for making acquisitions during this time period.
Selected reader comments follow:
It looked good on paper but ... it's one thing for a company to have an internal long-term plan; it's another to lay it out for investors, down to the penny.
In all of my years of doing this, I never quite understood why or how any company could claim to see that far out. Now we know—they can't.
Wall Street analysts may see this as a good move but then Wall Street analysts typically aren’t that smart. They’ll characterize it as selling-off a low-margin server business (Intel-based servers) to concentrate on a higher-margin server business (Z-series and P-series big iron) but the truth is IBM has sold the future to invest in the past. Little servers are the future of big computing. IBM needs to be a major supplier and a major player in this emerging market.
If you look at the technology used today by Google, Yahoo, and Amazon and many others you’ll see it is possible to operate a large enterprise on huge arrays of inexpensive Intel servers. For a fraction of the cost of an IBM z-Series (mainframe) or p-Series (mid-range UNIX) system, the equivalent compute power can be assembled from a modest number of low cost servers and the new software tools. IBM turned its back on this truth today by selling the Intel server business.
Maybe this wouldn’t matter if IBM was selling a lot of those higher-margin Z- and P-series machines, but from the look of their latest earnings statement I don’t think that’s the case. So they are selling a lower-margin business where customer are actually buying to invest in a higher-margin business where customers aren’t buying. Yeah, right.
Selected reader comments follow:
Now the lawsuits and canceled contracts you see customers bringing onto IBM (Bridgestone, State of Indiana, State of Pennsylvania, State of Texas, Disney, First Tennessee) are a real harbinger of how utterly dysfunctional Services has become.
Remember, the ‘leaders’ of this company, and particularly Services, are all MBA types with Finance skills, not technology or vision skills, therefore they haven’t a clue as to what it takes technically to make healthy I/T happen. I was on the inside and know what went on and how things stand now and as a result, I wouldn’t outsource my data entry to IBM. If they are betting on services saving the day, they are smoking some really good stuff from Colorado! Maybe Boulder…
Everyone that I spoke with was initially happy to be acquired by a “giant” in the industry, but that soon changed. Each member was offered substantial compensation to stay and insure success, on the average of 2 years. At the end of the 2 year period, most if not all were so shell shocked and numb for the aforementioned “whiffle bat” experience that they couldn’t wait to run for the doors. If you don’t believe me, ask the folks in Canada about their Cognos experience.
All the Wall Street experts exclaim the accomplishments of such a legendary bellwether, but the view from inside is decidedly different. My viewpoint was the company is run by accountants and spreadsheet jockeys, neither of which have any idea of business acumen besides what appears on a spreadsheet.
In previous companies, if one were to achieve success with a product, every effort was made to improve that product and make it more successful. Not quite the IBM way. Once a product proved to be successful, the model seems to be, “how can we make this more profitable?” So the first thing that happens is they cut the budget…say 10-15% and raise the sales projections by similar amounts. If that product were to achieve those goals, despite the odds, they again, would reduce the budget by similar amounts and raise the goals a like amount.
Several products, Websphere, DS8000, BladeCenter and SVC were able to achieve “success” in this manner, yet, despite the success, the yearly “Fall Plan” (which is a whole another story into itself) saw a constant decline in the resources for each of these products.
The end result was feature/functions became fewer and farther between, support resources became much more constrained and customer satisfaction continued to reduce at about the same rate as the resources. It was amazing to hear executive discussions wondering why customer satisfaction was diminishing. To those of us in the trenches, it was pretty clear...duhhh.
IBM never outright kills a product, they just continue cutting resources until it reaches a point where sales revenue approaches the amount they are spending on it. Then it either dies or they sell it off like they did with the printer business (once legendary), the hard drive business or the laptops, of which Lenovo was able to not only revive but turn around quickly and become dominant in the industry. I suspect they will have similar success with the x86/Blade/PureFlex business.
IBM has had some tremendous people, the guy who invented the 3 finger salute Cntl+Alt+Del (sadly passed away last year), a team that invented the supermarket bar code scanner, the team that designed the system for BART, the fathers of the ATM, the original x86 PC, and a guy that when I first joined was dragging atoms around to construct the first atom transistor while we were worried about whether a Qlogic HBA was as compatible as the Emulex HBA. Yet, these resources are constantly being devalued as more and more responsibility is shifted to college hires across the globe. These are typically smart kids, but there is an old saying “Experience is so valuable because you can’t buy it”.
I don’t agree with the pundits that say IBM will die, but also believe that there are more hard times ahead then there are good times. Times are a changing and while “playing it safe” has ensured stability for more than 100 years, that strategy will not serve well for the coming changes in technology. Dreams of cloud computing and the ability to compete with the Amazon’s and Google’s of today have left this bellwether a long ways behind the 8 ball. Have since moved on to other opportunities and while I love my former colleagues, I fear for their safety, Apollo is but the next great adventure for them and thankfully I will not be a part of that exercise.
PureFlex or Pure Systems. What a dumb name. Sounds like a water filtration system for your home. Remember what happened to Coke when they changed their formula? And CLOUD? My personal opinion is that cloud is a security disaster waiting to happen. Who is going to control security in the “cloud”.
Oh, BTW, HR and the bean counters are running the company.
The Power 5 servers were amazing compared to their competition. Our software benchmarks were designed to stress the Application Server, not the Database server, so a smaller database could support a much larger App Server, or so we thought. The P5s were so fast that our 4 core Intel Database machines couldn’t keep up with our 4 core P5 boxes. The only machine we had that was fast enough to run the Database tier for a P5 app server was another P5 box. Add to this a seeming insurmountable lead in LPAR and Virtualization technology, and a superior profit margin, and one could easily make a case for selling off X to preserve the dominance of the Power technology platform, which backs all of IBMs servers (P, I, and Z).
But as I said, that was 2004. Then Sam went to work turning IBM into a holding company that he and other top execs could loot. First wages were basically frozen because we never made our internal goals no matter how much we beat Wall Street. Then we stopped getting co-ops and college new hires. Soon we had a yearly layoff, then bi-yearly, then quarterly. Product development and R&D budgets plummeted, squeezing the most profit out of our current products, at the expense of the next generation.
By the time I left the team in 2008, Intel had pretty much caught up core for core with Power; now it’s not even close. Intel has the fastest server processors on the planet. Everyone else is years behind given the current levels of investment. So while it’s good that IBM finally got out of the commodity server business, it’s really really bad that they did it 10 years too late. It also begs the question, how to they expect to compete in the cloud business, if they don’t understand how to make commodity infrastructure profitable?
Cons: Few opportunities for advancement in North America. Executives are tone deaf. Limited staff to support clients. Morale horrible. Using outmoded stacked ranking.
Advice to Senior Management: This advice is really to SVPs since low-level exec and line management do not really have any leadership impact and merely are in react mode to save their own jobs. Stop the short term looting of a once great company and invest in the long term focus on customers and employees as an asset instead of liabilities. This may mean actually leading the company and forgoing personal wealth targets. Any company that predicts EPS 5 years in the future is intoxicated on its own current performance and is just seeking to become an investment tool—not a company. Stop buying back shares to buoy the price and taking profits from your own stock awards, RSUs and bonuses. On demand, smarter planet, big data, watson—stop with phrases and start creating something of value!
Cons: Not as it used to be. Previous Director takes good care of the employees. Family days, company-employee events, subsidies (in-office beverages, medical coverage,etc) were good. New Director took most of it away and so far no Annual Day event for 2 years straight now. Probably try to hard impress the board at the expense of the employees.
Very poor bonus-performance system. Seen good employees (company-oriented ones) receive mediocre bonus due to the reporting manager's *ahem* misjudgement (read:dislike).
Seen lots of good employees not being promoted to supervisory/manager level despite he/she is more knowledgeable and better at decision making than the reporting managers. Also seen ridiculous employees promoted due to @$$-kissing and if you are from the light-skinned race (not being racist here, mind you).
Highly recommend IBM to remove the tagline "Equal Opportunity Employer" as it is no longer for more than 5 years now.
Advice to Senior Management: Have a deep look at your 1st line and 2nd line managers. Get the employees feedback on them. Do not take in 100% what the managers are saying about the employees as most of the managers are just judging based on their emotions, totally UN-PROFESSIONAL at all.
The large number of managers from the certain light-skinned race speaks for itself.
If you are not from the light-skinned race, do not dream to climb up the corporate ladder as you will have a hard time to get promoted due to your hard-work.
If you are from this light-skinned race, get in, work at your pace, be promoted within the 1-2 years. Very high chances to be in supervisory role well within 1-3 years. No, I would not recommend this company to a friend
Cons: Things started getting bad about 6 years ago. Raises for long term employees mostly disappeared. Some of my colleagues have not had a raise in 7 to 8 years. My cost for insurance for my family went from $180 per month in 2004 to $724 per month in 2013, 289% increase. If you are IBM US your days are numbered. A few years ago IBM implemented its plan to reduce US employee head count by 60%. Moving everything to IBM India. I believe they are in year 3 of the 5 year plan. They can get 2 to 3 employees in India, with little to no experience, for the price of one US employee that had many years of experience. And the work product delivered shows a drastic decline. At one point I actually had to tell an offshore resource who had not added error trapping/handling to a project "because the customer did not ask for it" that it is up to us as professional developers to add it because it is part of industry best practices. Every year when they announce the resource actions (sometimes 2 per year) I hold my breath. I know my days are numbered, because I have 15 years now. Maybe I can get one more year.
Just my 2 cents.
Advice to Senior Management: Ms. "Ginni" Rometty needs to change this trend of getting the cheap labor from offshore, or the already diminishing IBM image will crash completely and she and all of the executive board members will be in the job hunt. Of course they will all have a nice multi-million dollar severance package, while the displaced employees will get the 2 weeks salary for every 6 months worked severance ( up to 26 week max). No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.
Cons: IBM seems to be focused solely on the bottom line. The company no longer seems interested in maintaining a competitive advantage through technical innovation or by attracting and retaining top technical talent. IBM is bleeding away talented people through resource actions (aka layoffs) and people leaving on their own initiative. The remaining people are expected to carry the ever growing workload with fewer resources after losing strong experienced people. Also, the periodic layoffs strip away any sense of job security.
Advice to Senior Management: Stop focusing on the bottom line. Make it a priority to attract and retain top technical talent. Use technical excellence and innovation to create and keep a competitive edge. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.
I fear that the PBC "3" might be coming my way. I AM NOT A 3, and if I am rated as such, then I will act accordingly, like a "3". I will sign on at 9, sign off at 5, no weekends, take my lunch break every day. Not one bit of extra effort will be exerted on IBM. I will spend my time networking and doing my resume and looking for another job. It is sad because I really WANT to be an IBMer, I like my co-workers, team leader and my manager, I am sure it is not her fault at what she is being forced to do by upper equity vested goon management. -ForceMeToBeThree-
Alliance reply: Use your time to help organize the Alliance. Talk to your co-workers, send us names of IBMers and their email address. Don't just go meekly out the door.
"in view of the company's overall results, my senior team and I have recommended that we forgo our personal annual incentive payment for 2013".
Big deal. They are rich enough to withstand that. They should forgo their jobs. As we go through another critical time for employees we need now more than ever for people to say no to Roadmap 2015. The Alliance is here to help organize and fight back. Information is also key. Send RA packs to the Alliance at firstname.lastname@example.org -Alliance-
It is sad you career has come to this ! Feels like I am reading posts from a bunch of sheep. Wake up people, this is the IBM of 2014, they will do anything to fulfill this crazy Roadmap 2015 strategy and if it means cutting YOU, it doesn't matter! It doesn't matter what you have done for IBM or what your appraisal rating is. Be prepared to leave and always focus on your skills and career! -longtimrbeemer-
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.