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Highlights—February 8, 2014

  • Poughkeepsie Journal: Rally: Show jobs or repay breaks. Residents, labor groups, officials seek IBM answers. Excerpts: Dutchess County residents, business owners and politicians said they have a message for IBM Corp. and other companies that receive tax breaks totaling billions of public dollars annually from state and local governments: Show us the jobs and the data or give back the taxpayer dollars.

    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.

  • Mid-Hudson News Network: IBM hammered by activists, NY lawmakers for cutting jobs while taking state tax breaks. Excerpts: Several area state lawmakers, Democrat and Republican, gathered with community activists and organized labor near the IBM Poughkeepsie facility on Thursday to decry company layoffs despite state subsidies of almost $1 billion to the company.

    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.

  • Greenock Telegraph (England): Job loss fears after IBM outsourcing deal. The computer giant has agreed to offload a server business to Beijing-based Lenovo — the world’s biggest PC maker. A total of 200 staff in Inverclyde are said to have been told by bosses that they will be affected by the switchover.

    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 Register (United Kingdom): First Dell, now IBM: 15,000 jobs face the axe at Big Blue, says union. 'Workforce rebalancing' will take place in the first quarter. By Brid-Aine Parnell. Excerpts: IBM is set to spend another $1bn on job cuts this year to eliminate an estimated 15,000 jobs worldwide, according to trade union Alliance@IBM.

    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:

    • weird: I find it odd that the mainstream news continually tells us the financial crisis/recession/depression is over and things are improving yet we are continually being shown evidence to the contrary on the Reg where hundreds of thousands of people are being laid off in IT. Lay off 10000 IT people and you won't need as many HR staff, accounts staff, managers, coffee shop workers, caterers. Once their redundancy cash is gone they will stop employing plumbers and electricians and builders.

      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?

    • Re: weird Certainly seems like it. I too call "bullshit" on the "recovery". At my workplace:
      • 2010: No bonus
      • 2011: No bonus, No pay rise.
      • 2012: No bonus. No pay rise.
      • 2013: No bonus. Pay cut.
      • 2014: No bonus. Pay cut. Redundancies.

      Getting worse, not better :-(

    • In the interest of balance I'd like to point out the company I work for, a direct (if much smaller) competitor of IBM, is growing revenues annually at around 20% with the hiring and payrises you expect in a company doing well.

      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

    • Poor IBM... When you let your bean counters run the company, you end up watching a slow death.

      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.

    • IBM is only interested in one thing: earnings per share. If that means selling off the entire company then that's what will happen, after which the company itself will be sold for the very little value that is left.

      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.

  • UNI Global Union: IBM discards its greatest asset – its employees. Full excerpt: There were times when IBMers were proud to work in one of the largest IT-companies in the world. They were respected as employees, were well paid, had secure jobs and worked in an environment conducive to innovation and collaboration.

    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.”

  • The Register: IBM nearly HALVES its effective tax rate in 2013 - report. Big Blue reportedly benefits from shuffling profits through Dutch subsidiary. By Brid-Aine Parnell. Excerpts: IBM has managed to legally reduce its tax payouts by billions of dollars after sending its profits through a Netherlands subsidiary that acts as a holding company for more than 40 of its firms worldwide, according to Bloomberg.

    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.

  • The Financial Times: IBM eyes sale of semiconductor arm. By Ed Hammond and Richard Waters. Excerpts: IBM is exploring a sale of its semiconductor business in what would be its most significant strategic move since it faced a financial crisis in the early 1990s. ...

    “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.”

  • EE Times: IBM’s Chip Unit on Chopping Block? Impetus behind the talk. By Junko Yoshida. Excerpts: Here we go again. Discussions about putting IBM’s semiconductor business on the chopping block have returned with a vengeance.

    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:

    • I am wondering...how can they keep the research without access to fab facilities? This goes together in my opinion. I don't know of anyone else in the industry doing similar research without access to a fab.

      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.

    • Another nail in the coffin! Focus on services is misguided and will result in moving the rest of the business off shore (India). Here goes the (next to) last of American electronic giants!
  • Forbes: IBM Selling SDN Unit - But Why Sell The Stuff That Is Hot? By Ben Kepes. Excerpts: Re/code is reporting today that IBM is pondering selling its Software Defined Networking (SDN) business unit. Unnamed sources are suggesting that $1B might be the price tag for the unit. This news comes only a week after IBM sold its x86 server unit to Lenovo for $2.3B. It’s like the village fair at Big Blue with seemingly everything on the block. So what’s up?

    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 Connecticut Law Tribune: Former IBM Employee Wins Up To $4 Million In Age Discrimination Suit. By Christian Nolan. Excerpts: James Castelluccio v. International Business Machines Corp.: A Stamford man who claims that IBM dismissed him after 41 years because of his age stands to collect between $3.5 and $4 million following a federal court trial.

    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."

  • Washington Post: AOL chief ignites firestorm over 401(k) cuts and ‘distressed babies’ remark. By Jia Lynn Yang. Excerpts: It should have been a glorious week for AOL chief executive Tim Armstrong. His company’s quarterly earnings, announced Thursday, were the best in a decade. “Olympian,” he declared. Instead, he angered employees, insulted parents with sick babies and shined a light on a practice seeping its way into corporate America that threatens to rob workers of thousands of dollars in 401(k) savings.

    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.

  • Wall Street Journal: AOL Chief Reverses Changes to Benefits Policy. Armstrong Apologizes For Comments That Angered Employees. By William Launder. Excerpts: AOL Inc. Chief Executive Tim Armstrong said Saturday that the company would reverse a recent change to its 401(k) plan and apologized for remarks used to explain the initial change.

    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.

  • Wall Street Journal: Wary Stock Investors Raise Bar for Earnings. Some Shares Pushed Lower Even After Meeting Forecasts. By Alexandra Scaggs. Excerpts: Investors this year are showing an impatience rarely seen during the record-setting 2013 stock-market rally, digging deep into corporate quarterly reports and often sending shares falling even if companies meet forecasts.

    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. 

  • Forbes: Three Shrinking Giants: IBM, HP And Yahoo. By Peter Cohan. Excerpts: What were the boards of IBM, Hewlett Packard, and Yahoo thinking when they appointed their latest crop of CEOs? Each of them have presided over lumbering giants that have shrunk in the last year. ...

    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:

    • I believe the ‘plan’ for Ginni is to squeeze whatever it is she has to squeeze to make the $20EPS by 2015 then run, with a fat wallet reward from stock. Sadly this woman has no real interest, or faith in IBM – the company, or it’s staff.

      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.

    • IBM was not doing well before Ginny took over. They found many reasons to illustrated to the market that they were doing well; and over time the quality of their illustrations and excuses diminished over time. I have a firm belief that Ginny has more integrity than the previous CEO, and as such she is unwilling to play the same games. She is more ready to “eat crow” and that is a positive.

      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.

    • The problem with Ginni is that Sam Palmisano ran the business into the ground and had enough inside information to know the show was done. Sammie retired, announced a stupid $20 EPS goal by 2015 and Ginni got stuck with the declining business. Everyone applauded IBM for the first female CEO in its history but little did they know that Sammie had set her up to fail. Trying to not fail, Ginni is slashing and burning everything and assuring that IBM will fail in the next 10 years. Ginni, do what all successful CEO’s do, hire a good spin doctor and work your way out of that $20.00 EPS promise.
  • Glassdoor IBM reviews. Selected reviews follow:
    • The only way to meet EPS is cost cutting” Business Unit Executive (Former Employee), New York, NY. I worked at IBM full-time for more than 3 years. Pros: Wide array of jobs and career opportunities. Excellent R&D machine. Cons: Death spiral to mediocrity: Bring in cheap help. Cheap help yields poor results. Cost cutting necessitates bringing in more cheap help. No flexibility. IBM way (which is failing) or the highway. Poor execution of acquisitions. Poor pay and commissions. Advice to Senior Management: Bring in top talent. Pay for talent. Focus on results. Empower people to make needed change. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • It really depends on your team” User Experience Design (Current Employee), San Jose, CA. I have been working at IBM full-time for more than 10 years. Pros: Complete autonomy, if you have the right manager your job is your own and they are there to help and facilitate your career. Excellent work life balance. You also have the opportunity to work with a lot of different teams and projects. New focus on design at a corporate level. Cons: The global workforce makes finding workable meeting times. Not as many small benefits as other companies, especially in the SF Bay Area. The wrong manager can derail your career. A lot of tenured colleagues can hinder progress to modern updates. Yes, I would recommend this company to a friend. I'm optimistic about the outlook for this company.
    • Work as hard and long as possible but don't expect recognition and/or compensation increases.” Anonymous Employee (Current Employee), Cumberland, MD. I have been working at IBM full-time for more than a year. Pros: Retirement and health/dental benefits are great. Growth opportunities are available if you are willing to work for it.

      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.

    • Software Engineer” Anonymous Employee (Current Employee). Pros: Self-motivated workers can be rewarded with more responsibility, possible opportunities within group. Work from home opportunities. Cons: Employees not ultimately valued—e.g. no real HR dept. Difficult to move around. Executive management lacks technical vision—it's a sales/marketing co. Low morale. Growth via acquisition and gutting. Slavish dedication to EPS not related to real revenue (i.e. stock buyback and expense slashing). Advice to Senior Management: Rotate in fresh, younger senior executive management raised outside the IBM culture. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • Too much sugar for a dime.” Senior Systems Administrator (Former Employee), Cumberland, MD. I worked at IBM full-time for more than 8 years. Pros: Good experience, great people. Was treated fairly for the most part. Training was good also. Got to work with lots of great new equipment. Cons: Will paperwork you to death. Constantly barraged with requests for updates to you PBCs and assorted on-line websites. You spend more time in meetings and updating IBM required documentation than actually working. Advice to Senior Management: Reduce or eliminate about 90% of the PBC structure. It is unnecessary and wastes time. No, I would not recommend this company to a friend. I'm optimistic about the outlook for this company.
    • IBM offers a friendly environment, helpful employees, and great projects that make you feel valuable even as an intern” Software Development Engineer (Former Employee), San Jose, CA. I worked at IBM as an intern for less than a year. Pros: Besides its brand-name, IBM offers great benefits - mobility, stability and job security, limitless hardware and software opportunities, amazing coworkers, beautiful offices and employee benefits, and a minimally stressful work environment. Cons: IBM is at the very edge of San Jose, a bit of a commute for some. Also, the company is very stable, but because it is so large, it may be a bit difficult to climb the career ladder. Advice to Senior Management: I didn't personally experience this, but engineers sometimes have to deal with unreasonable demands because managers aren't familiar enough with technical details to understand that their plans may not be feasible. I would suggest becoming more familiar with the technicals and discussing plans with an engineer before setting harsh deadlines. Yes, I would recommend this company to a friend.
    • Get Experience and Get Out” Business Analyst (Current Employee), Dubuque, IA. I have been working at IBM full-time for more than 3 years. Pros: IBM does provide opportunities to learn, either on the job or through their online offerings. Cons: Employees are NOT valued. Pay raises are non-existent for most. Promotions are nearly non-existent too. People management skills are very poor. When management doesn't know what else to do they blame the employees, start a new micro-management scheme, and lay off everyone they can. Customer service is very poor. IBM would rather pay a penalty to be released from a contract than to fulfill the contract. IBM is using under-handed and dishonest means to avoid the customer requirements of on-shore business. Advice to Senior Management: Treat your employees like people, not things. The rumors are constant and the fear of losing your job never ends. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • Mixed Emotions” Project Manager (Former Employee), Saint Paul, MN. I worked at IBM full-time for more than 10 years. Pros: Benefits are good and most of the team members are very professional and good to work with. Cons: Long hours, many management changes and need to have a separation from personal manager and account manager as the focuses are conflicts. Advancement is difficult unless you are constantly in class or "know someone". Advice to Senior Management: Review the actions to make continual management changes and if new managers are placed, they should not make personnel decisions without guidance. Yes, I would recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • Wasted 5 years of my life here” Sales Representative (Former Employee), Dublin (Ireland). I worked at IBM for more than 3 years. Pros: Nice people; that's it. Was an awful experience. Cons: Terrible salary and ote. Not results driven; perception is what ticks the box. No career plans and you can get a bad performance rating despite hitting or overachieving; this is wrong. Management don't respect or listen to staff. Big corporate with terrible benefits. Unhealthy food in canteen. Advice to Senior Management: Need to create roles to inspire results-driven employees; this is why IBM is losing market cap. Control the aggressive management style. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • This is not your father's IBM of yesterday” Client Representative (Former Employee). I worked at IBM full-time for more than 10 years. Pros: Hard working people that work hard trying to keep their jobs. Cons: The problem is management—so many mid-level managers don't work with customers and have no idea what is going on. They are killing this company slowly but surely. Advice to Senior Management: Cut at least 50% of the mid-management positions immediately. These managers don't work at all. The real people are on the phone with customers driving business. These are the one that always get cut when the heads roll every year—not management. If this doesn't stop, this hot air balloon will not float any longer. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • I jumped through hoops to be a new hire only to be laid off after 18 months.” Anonymous Employee (Former Employee) Pros: The pay was good. The people I worked with were great. I enjoyed my project. Cons: Lay offs are an annual ritual. While I loved what I did, I didn't like the stress that came during "layoff" season. It was starting to feel like a lottery you didn't want to win.
    • Used to be the best but no longer” IT Specialist (Current Employee). I have been working at IBM full-time for more than 10 years. Pros: The people! Can't be beat, but we are being beaten down. Cons: Focus on share price; people are commodities to be disposed off or used as required. Stupid PBC bell curve means that each year people slip. 45 hours work required or else; only paid for 37. Payrises only for high performers, but with bell curve less of those each year. Advice to Senior Management: Wake up! People made this company, only people can save it. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • Test Engineer” Anonymous Employee (Current Employee). Pros: You get paid to work. I have to have 20 words here, but I have no more nice things to say. Cons: Constant worry about being laid off. Cost cutting measures at every corner. No more innovation. No more time for improvement. Infrastructure is rotting from within. Advice to Senior Management: By firing good employees you are tarnishing your reputation. I would not recommend a job at IBM to anyone.
    • IBM is what you make of it. Like many corporations, you're expected to grow old and die with the corporation.” Software Developer (Current Employee), Herndon, VA. I have been working at IBM full-time for more than a year. Pros: Job stability is huge. You get paid a salary while on the bench between jobs, and you can choose your own path, completely separate from what your focus was in undergrad.

      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.

    • Long time career employee” Advisory Software Engineer (Current Employee), Hopewell Junction, NY. I have been working at IBM full-time for more than 10 years. Pros: The people I work with are smart, wonderful people. Good work life balance. Very flexible with personal time off if needed.

      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.

    • Lots of opportunity but it's hard to even have a deckchair let alone chase them around the ship” Anonymous Employee (Current Employee). Pros: Flexible work locations, wealth of knowledge. Cons: Everything is a battle, globalisation.
    • Accounting Analyst” Anonymous Employee (Current Employee). Pros: Great work from home capabilities. Great people to work with. Very knowledgeable staff. Cons: Out of touch with employees. Pay is well below industry average. Too focused on cost cutting, instead of growing revenue. Advice to Senior Management: Get rid of PBC ratings, invest in your employees.
    • IBM is a technology leader but the employee experience has been worse that McDonalds.” Desktop Support (Current Employee) Columbus, OH. I have been working at IBM full-time for more than 5 years. Pros: IBM can be very understanding when personal issues come up. They really are company centric which is good for stock holders. Cons: They encourage micromanagement to the extreme degree which can be very limiting. They are not interested in the caring for the customer as much as the overall success of meeting the metrics on huge accounts. This tends to be a disservice to the actual clients. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • Company with great ideas and potential” Anonymous Employee (Current Employee). Pros: Huge widespread reach across the corporate world with contacts in EVERY company! Great ideas and potential to launch the next big thing. Cons: Sometimes its huge size comes in its own way preventing quick and successful execution. People are constantly pushed to over deliver so most employees are overworked with poor family/work balance. Advice to Senior Management: Streamline processes to execute faster. Take care of employees better to prevent burnout.
    • It's not your father's IBM anymore” Sales Representative (Former Employee), New York, NY. I worked at IBM full-time for more than 5 years. Pros: Training, flexibility, and worklife culture. Cons: Downsizing—what IBM stands for. It's about money. Outdated technology and bad management. Shipping US jobs overseas. Advice to Senior Management: IBM also stands for I am By Myself which means management is not there to help! They are puppets and controlled by strings. Yes, I would recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • Good but it depends” Software Engineer (Former Employee), São Paulo, São Paulo (Brazil). Pros: You can learn a ton of things that are IT related. People are serious about their jobs. Cons: Management persecutes employees after "warm" discussions. I witnessed 2 employees giving up on the job because of that. They lay you off for no reason at all and they are very confused as far as second line and first line managers interactions. Advice to Senior Management: C level should implement people management policies because it's very clear that persecution occurs within Brazil's Rational Support division and because the first line managers have "positions of trust" the incidents are not properly investigated by second line managers when a request for layoff is given to them. They simply and pretty much sign it blindly. Yes, I would recommend this company to a friend. I'm optimistic about the outlook for this company.
  • Glassdoor IBM Canada reviews

  • Alliance for Retired Americans Friday Alert. This week's topics include:
    • NY Gov. Candidate Astorino: Let Seniors Eat Soup, and They Won’t Need Dentures
    • Harvard-CUNY Study: Governors’ Refusal of Medicaid Funds May Kill up to 17,000
    • Affordable Senior Health Insurance to Supplement Medicare
    • Vote to Extend Benefits for the Long-Term Unemployed Fails in Senate
    • Republicans in House Discuss Tying Debt Limit to Medicare
    • “Compassionate Allowances” Speed up Social Security Disability Claims
    • Come to the Alliance’s Convention, April 28 – May 1, 2014, at Bally's Hotel Las Vegas
New on the Alliance@IBM Site

Job Cut Reports

  • Comment 02/02/14: PBC1 guy here. Got the same raise last year as a PBC3. Getting the same bonus this year as a PBC3. I've said it before on this site but what is really needed is for a well organized IBM Blue Day. Imagine the confusion and bad PR is even 30% of the workforce called in sick. Follow this up by work to rule. Do exactly what your manager asks you to do - TO THE LETTER. You'll be amazed at how quickly things will start to fall apart. For now, I'll continue to as little work as humanly possible, make excuses, take sick days off and basically do whatever the hell I feel like doing. IBM doesn't notice or care anyway. -PBCJoker-
  • Comment 02/02/14: I am one of the few IBMers to receive a 1 this past year. I have worked my butt off for IBM and my group is profitable. We are all going over to Lenovo and are very happy about it. Ginni has a strategy that does not include hardware or traditional services. It is SoftLayer, Watson and smarter computing. Everything else is on the block. -Top Contributor- Alliance reply: Please be aware that many that were sold to Lenovo in the PC sale, lost their jobs in Lenovo job cuts. You all might be happy now, but without a contract or employee representation you will be at Lenovo's mercy just like you were at IBM's.
  • Comment 02/03/14: Working harder than what you are payed for or 40 hours in an attempt to get a PBC 1 or 2+ is a complete waste at IBM. It's simply foolish. Do your 40 hrs and go home. Killing yourself or destroying your health or family for IBM is simply insane or stupid. In the end you would have lost your health and family and would be laid off with meager severance anyway, if that. It will not pay off like the old days. Only people that will benefit will be upper management and the shareholders. The only positive thing I can say for IBM is that at least they give you a severance and lay you off. Many shareholder run companies now will simply fire you for cause (not following employee handbook etc) with no severance, health or unemployment. It saves them money. Oh and start a labor movement within IBM also. -slack-
  • Comment 02/03/14: PBC 2+ guy here! Worked my butt off last year. Over achieving my utilization by 14%, helping sell a crap load of service engagements (approx. 500K), met all my other objectives...and I will get nothing in incentive pay! So, this year I am maximizing my time off (bench) and looking forward to receive my RA package...hopefully before year end. And if not, I will enjoy my time off.-Anonymous
  • Comment 02/03/14: I was just asked if I am willing to relocate to a different state, with my entire family. To sell my house, car, etc. and get settled elsewhere, for a another opportunity within IBM :-( I fear if I turn it down, that's the end of my career. Why would anyone even consider moving to a different state though, for work? I can't even imagine giving up my friends, etc. not for IBM where I can be RAd a month from now. -confused-
  • Comment 02/03/14: Confused, I would never in my wildest dreams relocate for IBM. The company is neither reliable nor trustworthy anymore. Twenty years ago, I would have done it. Not anymore. No way. -Anonymous-
  • Comment 02/03/14: Relocate for IBM? Only if it's to an area with plenty of job opportunities for when you get RA'd in a year or two. As the "NEW" person in the organization you will have no political allies. New to your job and a virtual unknown you will certainly be rated a 3 the first year; that's a given. Unless you are damned good or damned lucky you will not impress the 2nd line or other managers that do the rankings in time for the second year so your a 3 again. Two threes and you're out. In a strange town, away from friends and family. Unemployed. Bad chance to take in todays toxic IBM environment. -Exodus2007-
  • Comment 02/04/14: -Confused- That's how IBM used to work, many years ago. Your job might move across country, but you still had a job. IBM was said to mean "I've Been Moved." -Anony-Mouse-
  • Comment 02/04/14: Does IBM even pay any relocation costs anymore? Maybe just a budget rent-a-truck without moving dolly? This is another ploy by IBM to get more resources (o.u.a.t. employee workers) to resign by refusing a work (re)assignment which means no severance which one would get with an RA. IBM's new "Respect for the Resource" is the polar opposite of IBM's old RESPECT FOR THE INDIVIDUAL! Respect, what Respect? -Dislocated-
  • Comment 02/03/14: Today is the BCG deadline. Funny how we the grunts have to complete this BS when neither line management or execs adhere apply the guidelines described therein. The exec audio in the module is a complete joke.... -Depressed-
  • Comment 02/03/14: Anyone care about things in China? Our team was brought up by US senior engineers, but on last summer, some of them, our mentors, friends were forced to leave, frustrated us. Now IBM screwed up Snowden case, revenue in China declined dramatically; there are rumors that STG China will cut 60% jobs, and non-sales jobs cut to 0. -ChineseLabor- Alliance reply: Yes and please keep us informed.
  • Comment 02/04/14: PBC top performers will received 6% salary as GDP. Everyone else will receive nothing. How is this fair? Dirty paws have taken away even this small incentive. Low life corporate thieves running this show. Rot in hell bastards. -GDP_GinniDeniesPay-
  • Comment 02/04/14: While I am no longer employed by IBM, I keep in contact with people I used to work with who still have jobs in my old unit. Scuttle butt is some groups in IBM China are experiencing upwards of 25% turnover. Dissatisfied people resigning and going to work elsewhere. BIG RA numbers coming soon to China and movement of some work back to Western Europe/USA. -SuperFly-

    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.

  • Comment 02/04/14: Is it true that SWG will not be hit with layoffs this round? I have heard that layoffs will be in STG, and discretionary in SWG. Anybody know anything? -Anonymous-
  • Comment 02/04/14: Just days after Ginni announced that she and her reports would not be taking a bonus, and that the vast majority of IBM Employees would also not be receiving a bonus, she exercised zero-cost basis stock options worth $6M and immediately sold half of the shares for almost $3M. http://finance.yahoo.com/q/it?s=IBM+Insider+Transactions -Something is Rotten in the State of Armonk-
  • Comment 02/04/14: -Dislocated- When I hired on as a new hire, IBM paid for my moving expenses plus a $4k stipend for misc. expenses up front (which was vested after a year). When I transferred within IBM by my own free will, I received an additional two weeks of paid time off to move, but other than that I had to pay my own expenses. (But at least all of those expenses were tax deductible). I would expect however that if the transfer was at the request of IBM that they would pay to move you. Note that one of the reasons I transferred was to relocate to an area with a higher number of technical jobs in the event that I got RAed. -I have been moved-
If you hire good people and treat them well, they will try to do a good job. They will stimulate one another by their vigor and example. They will set a fast pace for themselves. Then if they are well led and occasionally inspired, if they understand what the company is trying to do and know they will share in its sucess, they will contribute in a major way. The customer will get the superior service he is looking for. The result is profit to customers, employees, and to stcckholders. —Thomas J. Watson, Jr., from A Business and Its Beliefs: The Ideas That Helped Build IBM.

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