On Thursday, in the wake of the news that more layoffs may be coming at the largest private employer in the mid-Hudson Valley, former IBMers, politicians, labor leaders and community groups joined to call for support of the measure at Coppola’s on Route 9 in Poughkeepsie.
Alliance@IBM, an IBM workers’ group, is warning workers to expect more job cuts in New York and Vermont this month. Citing unnamed sources inside the company, the group said the deadline to select the employees to be cut was Jan. 24 and those employees will be notified Feb. 26. ...
In May, an ALIGN report claimed that New York spends $7 billion a year on business incentives and tax breaks, but doesn’t adequately oversee how the money is spent. The report cited IBM’s job cuts as the reason behind the Dutchess County Industrial Development Agency’s negative employment growth among current projects. ...
“IBM gets a variety of subsidies from state and local governments,” said Michael Kink, executive director for the labor-community group, the Strong Economy for All Coalition. “They have five deals with IDAs in the Hudson Valley and western New York and not one of those has created a single job.”
IBM cut 697 jobs in Poughkeepsie and East Fishkill in September, the latest in a series of layoffs in Dutchess where the company employs about 7,500 people. Analysts began speculating about more cuts when the company reported lackluster fourth-quarter results in January, including a 26-percent slump in hardware revenue. ...
In March, the county IDA voted to extend an agreement with IBM, according to Journal archives. It exempts IBM from paying state sales tax on internal transfers of computers it makes at its Poughkeepsie plant and uses for IBM Global Services at Poughkeepsie and at East Fishkill. ...
The deal also included IBM’s commitment to invest millions in the services infrastructure upgrades and computers at Poughkeepsie. After it completes the upgrade, a payment in lieu of local sales taxes kicks in. IBM gets relief from the state’s 4 percent sales tax.
“They’ve promised 92 jobs here in the Hudson Valley and they’ve actually cut over 3,600 jobs,” Kink said. ...
Carolyn Sylvia-Phillips was laid off from the East Fishkill IBM plant after 17 years with the company in 2007. She became an independent contractor for the company in 2010. In January 2011, her job was outsourced to Argentina and she was laid off again. “We the people need to ask, what is IBM really giving back to the community?” Sylvia-Phillips questioned.
They called the IBM grants “corporate welfare” and promoted transparency and accountability for large corporations.
The activists said Big Blue has laid off or outsourced an estimated 4,000 jobs in New York. ...
After the politicians had spoken, a few of IBM’s former employees, who have been directly affected by the company’s actions as of late, were eager to tell their stories.
One of the former employees was William Costein, a 31-year IBM employee, who was recently laid off and has become active on the subjects of corporate welfare, outsourcing and, he says, age discrimination, being employed by IBM.
He said that within days of being laid off, he saw an ad for the same job after he was told he could not get his job back.“The public should demand to know what the employment figures are of American citizens, they should demand to know what the visa labor participants are because they’re simply replacing American workers,” Costein said. ...
The session was held outside a nearby Coppola’s Restaurant on U.S. Route 9 in the town of Poughkeepsie because the restaurant’s owners said they have felt the impact of the layoffs on their business.
One worker told the Telegraph: “There is real concern that jobs and livelihoods will ultimately be lost as a result.
“We’re being told that no-one will lose their job — but we’ve been told that before and the complete opposite has happened. ...
IBM — who said today that redundancies were not ‘anticipated’ — refused to confirm the number of Greenock-based workers who are said to be affected by the deal.
A spokeswoman would only say that the number involved globally was 7,500. She said: “There are no redundancies anticipated.”
The company has already spent the same amount of money last year on 'workforce rebalancing', its euphemism for redundancies.
Big Blue's chief financial officer for finance and enterprise transformation, Martin Schroeter, has admitted there would be more cuts in 2014, during the announcement of IBM's fourth quarter earnings last month.
"As we look forward to 2014, we’ll continue our transformation, shifting our investments to the growth areas, and mixing to higher value. We’ll acquire key capabilities, we’ll divest businesses, and we’ll rebalance our workforce, as we continue to return value to shareholders," he said.
"In the first quarter, we expect the initial closing of the sale of our customer care business, and to take the bulk of our workforce rebalancing actions, which we’re currently working on."
The employee redundancies are part of IBM's ongoing mission to hit its target of $20 earnings per share, a target that saw the company sell off its server business to Lenovo at the start of the year. ...
Lee Conrad, coordinator of Alliance@IBM, said that the Lenovo sell-off was another blow to IBM staffers. "The hits just keep coming. Following the news that job cuts will happen this quarter, the latest is that IBM will sell one of its server units to Chinese company Lenovo. 7,500 workers worldwide will be impacted and moved out of IBM," he said. ...
IBM did not respond to a request for comment.
Selected reader comments follow:
Have I missed something or is this still the downslope of a recession regardless of the upward bumps in house prices caused by people desperate to "kick start" the economy?
Getting worse, not better :-(
I don't think the difficulties at large, dare I say dinosaurs indicates recession of failure of recovery
For all the IBMers that will lose their jobs, I'm hopeful you'll find a better deal and any one of the others companies that are part of the recovery
People are not all the same. Just because Joe sits in the cube next to me has the same job title, doesn't mean that he has the same skill sets and can do the same work that I can do. But to the bean counter, we are both FTEs with the same job description and therefore we should be replaceable.
That may be true of accountants or line workers, but not for people who have to think for a living.
To the bean counter... it's cheaper to take the hit and make older workers redundant who are working in one field than to retrain them on a new tech. Instead, they hire a recent grad who knows the new tech.
The reason this doesn't work is that the older guy has experience that can impact the decision making process and save the company from making a costly mistake. We can look at the Target breech and after the postmortem is completed, we should be able to see how the gaps in hiring and experience manifested itself.
Of course HR and the Bean counters don't want you to see that. After all they want you to focus on all of the short term gains they made by getting rid of the more expensive staff.
In terms of the economy, it's the same bean counters that make you redundant, also tell you that the economy is improving. They count a job pouring java in a coffee shop as the same as a Java developer.
Here in the UK, people are leaving in droves. Personally I was waiting for this redundancy package as it was inevitable and now it's here, I'm off. As has been mentioned, the industry is far from dead and people are still buying servers, storage, networks etc. Less tin, yes, but more clever software and the human intelligence and skills that go along with it. IBM has a lot of these and is choosing to ditch the lot. Of course, it's going to be those who can easily find new jobs who take the redundancies. It always is.
But things have changed in IBM since the company published its Road Maps for 2010 and 2015. Instead of focusing on the people that made the company great, IBM is now transfixed by numbers and Earnings per Share (EPS).
In 2013, IBM spent 1 billion USD on what it called “workforce rebalancing”, which means nothing else than a giant job cut. In 2014, the company is set to spend another 1 billion USD to eliminate an estimated 15,000 jobs worldwide. This comes at a time when the company continues to make hefty profits.
UNI Global Union and the UNI IBM Alliance denounce the company’s move to lay off its employees en masse. IBMers remain the company’s biggest asset, and should be in the forefront of any change. Alternatives to layoffs exist for companies looking to cut costs. Retraining programs can yield positive results for both employees and the company, and have been implemented successfully in numerous companies.
Lee Conrad, from Alliance@IBM CWA and UNI IBM Alliance Coordinator said “The hits just keep coming. Following the news that job cuts will happen this quarter, the latest is that IBM will sell one of its server units to Chinese company Lenovo. 7500 workers worldwide will be impacted and moved out of IBM”.
Said Alan Tate, Head of UNI ICTS: “IBM needs to go back to its roots and focus on what made the company successful for over 100 years. It needs to invests in its employees and ensure decent work. Innovation is what made IBM a great company not greed.”
At the end of 2012 IBM had accumulated $44.4bn of offshore profits on which it hadn't paid US taxes, the sixth-highest total of any American company, according to data compiled by Bloomberg from its securities filings.
In its results for the end of 2013, released last month, IBM listed its effective tax rate as 15.6 per cent, down from 24.2 per cent in 2012, giving the firm a tax provision $1.84bn lower than it had initially budgeted for.
The company said in an October filing that its tax rate was lower than it had forecast because of a "more favourable expected geographic mix" of revenue, but it didn't give any further details.
According to Bloomberg, IBM International Group, Big Blue's Dutch holding company, takes in earnings from more than 40 IBM-owned firms around the world, including its operations in Ireland. The Dutch firm has a list of around 205,000 employees, nearly half of IBM's global workforce, but only two per cent of them actually work in the Netherlands.
“It is a step away from their heritage,” said Patrick Moorhead, an analyst at Moor Insights and Strategy. “This is probably their biggest strategic realignment for 20 years.”
News of the process comes just a fortnight after IBM announced the sale of its low-end server business to Lenovo for $2.3bn.
However, unlike the server sale and disposals of other commodity businesses in recent years, a sale of the chip division would involve an exit from one of the most technology-intensive parts of its business.
IBM is one of a handful of companies around the world that have invested the billions of dollars needed to be on the cutting edge of the latest generation of silicon technology.
It is credited by analysts with having stolen a lead over US rival Intel in some advanced technologies. ...
The prospect of a disposal surprised some analysts, who said that having the most powerful chips at the heart of its IT systems had given IBM an edge in developing some of its most advanced computing applications, such as the Watson question-and-answer system.
“I’d be shocked – there would be no Watson without [IBM’s] Power chips,” said Rick Doherty, an analyst at Evisioneering in New York. “Take away the Silicon part, and IBM may not be the tech giant it is 10 years from now.”
The Financial Times Friday morning reported that IBM retained Goldman Sachs “to sound out possible buyers for the business,” citing unnamed sources “familiar with the matter.”
IBM is not making any comment at this time. ...
Here are some factors contributing to the impetus behind the talk. ...
Second, of IBM’s declining hardware business -- what’s left of it, the microelectronics group is the biggest loser. In the latest quarter, its revenue was down by 33%.
Third, it’s been two years since Virginia Rometty took the helm at Big Blue. It’s time for her to prove that she can make tough choices that her predecessors couldn’t.
During the latest earnings call, Rometty noted, “Looking ahead, we continue to invest to deliver innovations for the enterprise in key areas such as big data, mobile solutions, social business and security, while expanding into new markets and reaching new clients.” It’s not clear how IBM’s semiconductor business could possibly fit into the big picture she painted in her statement. ...
Nobody disputes an exemplary leadership role IBM has played in the global semiconductor industry. Even though the company continued to hack away at its workforce in its chip business, IBM, especially in its R&D activities, still commands respect and awe.
Selected reader comments follow:
Furthermore, selling the semiconductors division does it mean they go fabless or that they sell (or outsource) everything chip related? Both are problematic. For many different standpoints.
The biggest question that IBM's CEO would have to answer is if those fat software and services margins will remain as fat in the case of loosing the unique characteristics of the systems IBM provides. What is the main selling point of IBM if they loose the grip that they have on customers because of their proprietary systems?
I think that IBM should work hard on trying to make the most of its hardware division instead of trying to get rid of it. The whole thing is how far you look at the issue: short-term or long-term. For Wall Street, long term is totally meaningless. For any other business that wants to stay relevant (instead of becoming opportunistic) it is the other way around.
IBM is in the process of reinventing what it does – the purchase of Softlayer last year, and the increasing move towards Softlayer being the main thrust of its cloud computing offerings going forward indicate just how seriously IBM takes the battle with Amazon Web Services (AWS). While IBM is a little late to the party, it has the cash (or at least the asset backing), the enterprise credibility and the brand recognition to make up for a few false starts. It also realizes that no end of posturing or FUD will see it win this battle – it needs to offer credible products that customers actually want. ...
IBM’s jeopardy-winning machine Watson is an exciting technology that, frankly, IBM hasn’t known what to do with. Simply bandying around the term “big data analytics” doesn’t really achieve anything. However, announcements in recent weeks about Watson technology being used across other IBM vertical offerings indicate that the company now understands it needs to provide a compelling business proposition for its customers – simply showing Watson winning Jeopardy won’t do it. Enterprises need real solutions – analytics applied to everyday solutions to drive better results.
The drawn-out battle between what the plaintiff's lawyer called "David and Goliath" had been in the courts since 2009. Of particular note was a pre-trial motion concerning an internal investigation by IBM that drew the attention of employment lawyers nationwide. A federal judge, who ruled the investigative report inadmissible as trial evidence, said the probe was too one-sided and needed to be more neutral, perhaps done by an independent third party.
The IBM internal investigator said he would have ceased the age discrimination probe had the employee signed a severance agreement. The judge said IBM should have been interested in uncovering the truth regardless of whether the employee, James Castelluccio, had taken the severance package or pursued his lawsuit. ...
Castelluccio began working for IBM in 1968 as a computer analyst and earned numerous promotions over four decades.
By 2005, he was named vice-president of public sector delivery for IBM's Integrated Technology Division. His performance reviews were always positive, according to his lawyer, Mark Carta, of Carta, McAlister & Moore in Darien. Castelluccio, a Stamford resident, worked out of IBM's Somers, N.Y., location in Westchester County. His career went smoothly until his supervisor retired in 2007 and Joanne Collins-Smee became the new general manager for IT delivery services for IBM locations in the U.S. and Canada and certain parts of Latin America.
A few weeks before Castelluccio's 60th birthday, Collins-Smee, in her very first meeting with Castelluccio, asked him his age and if he was interested in retiring. He said he had no interest. The next day, Collins-Smee sent an e-mail to the human resources department saying she wanted to replace Castelluccio and that things were not going well between him and her, and that Castelluccio would agree with that point. Castelluccio never knew of this e-mail until the discovery phase of the subsequent lawsuit, Carta said. ...
"It was a difficult time to be put out to pasture like that," said Carta. "When you're used to working, sometimes seven days a week, being isolated in an office with nothing to do is not a happy position to be in."
Benching was reportedly an accepted practice at IBM. It was the company's way of indicating that an employee would be let go if he couldn't soon find another job within the company. A witness later testified about IBM's protocols regarding benching, saying that Collins-Smee was supposed to assist Castelluccio by informing him of job openings for upper management positions. But, according to Carta, she did not do so.
"We put in a lot of evidence about other younger employees that she promoted during the time period he was on the bench," said Carta. "There was no evidence she had him considered for literally hundreds of positions." ...
The defense strategy was simple. They claimed Castelluccio was no longer performing his job up to par and so he was benched. At that point, his boss could keep him only so long while he tried to find another job within the company and then he had to be let go.
IBM presented 10 witnesses at the two-week trial that took place in late January before U.S. Magistrate Judge Thomas P. Smith. Carta called four witnesses, as well as Collins-Smee, who was also a defense witness.
The jury deliberated for about a day and then returned a verdict in favor of Castelluccio. ...
An IBM spokesman said the company plans to appeal. "IBM thanks the jury for its service, but we strongly disagree with the verdict," said spokesman Doug Shelton. "We believe IBM treated Mr. Castelluccio fairly and did not violate the law in any way."
The strange turn of events began Tuesday, when employees began learning that AOL was switching its 401(k) match to an annual lump sum, rather than distributing the money throughout the year with every paycheck as it had done before. Only employees who remain at the company through Dec. 31 are eligible, meaning that anyone who leaves midyear won’t see any of the pay.
A number of companies, including Deutsche Bank and IBM, have been cutting their retirement benefits this way, saving millions of dollars just as more Americans are relying primarily on their 401(k)s because traditional pensions are being phased out.
The changes undercut a central virtue of the 401(k) system, which in theory should make it easier for employees to switch companies and take their savings with them. Instead, with people changing jobs more frequently during the course of their careers, the loss in matches can add up to thousands of dollars each time a worker switches employers. ...
The remarks enraged employees and set off a heavy dose of criticism online. The tech blog Valleywag created a chart showing Armstrong’s salary ($12 million in 2012) as measured in “distressed babies.” ...
Retirement experts say that the cut in benefits not only hurts those who leave the company midyear, but also those who stay put, because they lose the compounding benefits of having more money put into their accounts throughout the year. ...
IBM made its change in late 2012, setting off speculation that other companies would follow. The company’s action also spurred a stern letter from the two senators from Vermont, Patrick J. Leahy (D) and Bernard Sanders (I), who asked IBM to reconsider its decision and reinstate the 401(k) matches with every paycheck.
IBM’s senior vice president of human resources wrote back, defending the change by saying that it “helps us maintain business competitiveness in an uncertain economic environment, while allowing us to invest billions of dollars in employee compensation and benefits programs each year.” ...
But companies making the change are in the minority, according to Aon Hewitt, which consults on human resources and surveys companies regularly about their 401(k) practices.
The vast majority, 86 percent, contribute a match with every paycheck, according to Aon Hewitt’s most recent report. Only 8 percent do an annual lump sum, in line with past years.
The company recently decided to give employees a lump-sum contribution to their 401(k) retirement accounts at year-end, rather than matching contributions each pay period. The year-end disbursement was available only to employees active on Dec. 31 and meant that those who left before then wouldn't get a matching contribution.
The change hadn't caused much fuss until Thursday, when Mr. Armstrong caused a stir among employees and social media by saying that care for two staffers' "distressed babies" in 2012 cost the company about $1 million each. He used that example to help explain why the company was changing its 401(k) policy.
Mr. Armstrong was accused of using the infants as cover for the unpopular policy change and was criticized on Slate's website by the mother of one of the babies. ...
Mr. Armstrong in an email to staff on Saturday said AOL would reinstitute matching contributions for each pay period. "As we discussed the matter over several days, with management and employees, we have decided to change the policy back," he said.
Amid rising worries over soft economic data and the Federal Reserve's dialing back of its aggressive stimulus program, some of the most recognizable names in American business have suffered large share-price declines following quarterly reports deemed disappointing by Wall Street, even after per-share earnings met or exceeded analyst estimates.
The reversals have hit firms ranging from International Business Machines Corp. to Twitter Inc. and Yahoo Inc., underscoring the anxiety that has sent the Dow Jones Industrial Average down 4.7% this year.
Stock pickers said they were paying closer attention to the underpinnings of company profits, following a 30% rise in the S&P 500-stock index last year. Many seek so-called high-quality earnings they contend show companies have the capacity to adjust to future economic and market challenges.
"Not all earnings are the same," said Mark Freeman, chief investment officer for Westwood Holdings Group, which manages $17 billion. The question, he said, isn't just "what's the growth, but what's the composition of that growth?" ...
IBM shares lost 3.3% after the company beat earnings projections. Investors reasoned that the gains were driven in part by share buybacks—which bolster the bottom line by reducing the share count—rather than improving sales or profit margins.
Ginni Rometty has been IBM’s CEO since January 2012 — taking over a well-performing company. During her tenure, IBM’s stock has gone nowhere — trading now and two years ago at $182 a share. And in the last year, IBM’s revenues fell 5% to $99.8 billion while net income was down 1% for the year to $16.5 billion.
While billions of dollars on stock buybacks — including the $15 billion IBM’s board authorized in October 2013 — shrink the number of shares to help boost EPS, investors have an easy time seeing through the effort to mask IBM’s inability to grow. ...
Ironically, Buffett has invested over $11 billion in IBM shares and it is clearly turning out not to be one of his great investment ideas. IBM used to be a business with pretty good economics so its performance in the last two years suggests that either its economics have changed profoundly or that Rometty’s managerial performance could not be characterized as brilliant — and perhaps her decision to forego a bonus for 2013 reflects this. ...
Buffett probably should have stuck to his knitting when he decided to spend $11 billion on IBM shares. Fortunately, he can afford to lose the money.
Selected reader comments follow:
Morale is at an all time low, pay has effectively continued to shrink, staff are under increasing pressure to outperform year on year with fewer resources, skills education, and associate staff. IBM has seriously lost it’s way, although to be fair not all of this is Ginni’s fault. Sam P. started the rot, Ginni is simply a lamb following on from her previous boss, without the foresight to find her own way, because she really has little or no business acumen.
The company has a wall of steel set-up around itself and the outside world is generally ignorant of the rot, of plummeting staff morale, and the pitiful levels of business direction. Off-shoring to politically unstable regions where they intend to position global technical support only because the labor force is cheap, with no regard to customer satisfaction.
However, Ginny was part and parcel to what has transpired over the last 6+ years. It’s hard for any senior leadership team to break down the morale of a 400K+ workforce. It takes many years to do that and IBM has achieved that goal. What you are seeing today is the very foundation of IBM breaking due to lack of attention and proper maintenance. Ginny will tell you this is a transformation. I call it disaster recovery.
Cons: Work life balance at IBM: work until you have no life. Many IBMers are required to work 44 hours per week in order to increase employee utilization, which is basically a fancy way of stealing vacation and holiday time from employees by requiring them to make up their off time throughout the entire year.
Annual reviews (called PBC's) are a joke. The only way to obtain the best rating is if you sacrifice a large portion of your free time (above the 44 hours/week) in order to pursue education and "giveback" opportunities. This is unobtainable if you desire to be a family-oriented individual and are committed to volunteer activities that do not benefit IBM. If you do excellent work and go above and beyond expectations between 8-5, that will not be enough.
Advice to Senior Management: Employees make you who you are. Don't allow them to be neglected. Beware of a possible "brain drain" upcoming due to recent compensation announcements in addition to lax hiring practices. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.
Cons: Many projects are plagued with inefficient workflows. IBM is still handing out Lenovos with windows XP as of 2011. Pay raises take forever and are based on time waited, not performance. If you have low performance, it's used as an excuse to keep you from a pay raise though. Advice to Senior Management: Stop using Excel for database purposes. Yes, I would recommend this company to a friend.
Cons: Several years ago, IBM changed the 401K match for new employees to 3%. Prior employees receive a 6% match. Annual bonus' and merit salary increases ONLY go to the top performers in the work group (top 10-15% of employees). Annual performance reviews are stack ranked. That means there will ALWAYS be a bottom group regardless of how well you perform in your job.
Several years ago, IBM reduced the maximum vacation for employees hired after that date. They will never receive more than 20 days per year. Prior employees can receive 25 days. New employees start with 15 vacation days and max to 20 after 10 years of service.
Advice to Senior Management: Care more about the company and employees instead of your personal investment portfolio and stock options. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.
Alliance Reply: Even IF this is true; no US IBMer should rely on their former job with IBM coming back, or their current job in IBM as being safe. Don't forget that IBM offshored those jobs for one reason: Cheap Labor...much cheaper than they pay for a US worker. Organize and fight for your jobs now.
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