IBM, for instance, will "sell iPhones and iPads" loaded with any of 100 industry-specific software products codeveloped by IBM and Apple, while Apple will handle phone support for the products. Inevitability, on-site support will be handled by IBM.
As part of this, IBM will port about 150 of its applications to iOS. This software should be available starting this autumn, the New York-headquartered giant added.
The apps will all be developed by IBM but will still sell through the App Store and will have to meet Apple’s quality standards. I guarantee you meeting those standards will be a problem for IBM, but that’s not Apple’s problem. In fact as far as I can tell Apple has few if any resources deployed on the app side so for them it’s almost pure profit. Who can argue with that?
Cloud services for iOS are more complex and problematic. I’m doing a whole column shortly on IBM’s cloud strategy so I won’t go too deeply into it here, but let me point out a couple things. Apple has more data center space than does IBM, so it’s not like Cupertino needs IBM’s cloud capabilities. Apple is also a customer of Amazon Web Services, the largest cloud vendor of all. These facts suggest to me that this aspect of the deal is where fantasy hits reality. IBM wants iOS cloud services, not Apple. Big Blue dreams of iOS cloud dominance and they expect it will be fairly easy to accomplish, too. After all, they have a contract!
But to Apple the cloud services are just a necessary expense associated with getting device distribution to IBM’s customers. If no cloud services actually appear or if they do appear but are useless, Apple won’t care. Same, frankly, for the IBM apps.
Selected reader comments follow:
I can’t see IBM as a phone salesman, I can see us producing massive, slow, buggy apps with poor user interfaces; and if I’m wrong there then why do we do it with our current software offerings? IBM has managed to hide its inability to write good code behind corporate deals that deliver poor products and then charge to fix them. If we go direct to the public then we won’t have that last silk handkerchief to cover our embarrassment
May I present to you Lotus Traveler. This app-bomination sounds good on the surface: you can now check your Lotus Notes email on your phone! But wait, before you install you have to set the home screen passcode to a minimum 8 character password that includes a mix of upper and lowercase letters and numbers (on the Android version you also had to install some worthless anti-virus software). That’s right, they couldn’t just lock the app with a passcode, they had to lock the whole damn phone. So now when you want to quickly pull your phone out of your pocket to check the weather, you are now stymied by a complex passcode…might as well not even bother.
Oh, and what about the app? Garbage. The interface looked nice (by IBM standards) but it was slow and buggy. Needless to say I deleted it within a week. Every piece of software I used at IBM was horrible. Notes, Sametime, Sametime Meetings (for webcons), their Intranet search. Given that well crafted apps require an extra level of skill to run on the rather minimal memory and processor speed I can’t wait to see what IBM does here. There are probably a bunch of fresh Indian programmers already porting their bloated Eclipse applications over to it (My Help anyone?).
In fact, our analysis shows us that on a quarterly basis, the trailing 12 month growth rate for IBM actually turned negative last quarter, but the trailing 12-month yearly growth rate is still positive. Ultimately, it is that yearly growth rate that matters most, the quarterly growth rates often carry with them noise, but in our observations we always consider trailing 12-month numbers.
Global Technology Services revenues were $9.4bn, down 1 per cent year on year, and Global Business Services revenues were $4.5bn, down two per cent. Services signups were down 33 per cent for the first half of the year, compared to a year ago, which is worrying given the importance of that division to IBM's revenues. Software was up 1 per cent to $6.5bn. ...
However, IBM said in its earning release that "strategic growth initiatives" were growing quickly, with cloud revenue up over 50 per cent in the year-to-date, and its various "as-a-service" technologies now logging an annual run rate of $2.8bn. Mobile revenue was up "more than 100 per cent year-to-date", it said without disclosing any actual revenue figures.
Along with the new initiatives, IBM has also been on a firing spree as it seeks to increase profitability for Wall Street. IBM started a "slaughter" of its Indian and European workforce in February of this year.
Selected reader comments follow:
Sorry this is anonymous but we're not allowed to say such things.
I think that this focus on returns to shareholders is driven by the directors and has nothing to do with the demands of Wall St. IBM's directors are in this business for one purpose alone, to make as much money as they personally can at the expense of the staff and the company.
In its recently completed quarter, IBM again repurchased nearly $4 billion of stock—which amounted to about 93% of its net income for Q2. Likewise, IBM also reported lower sales versus prior year for the ninth quarter in a row.
This juxtaposition should not be surprising. For more than a decade now, IBM has been eating its seed corn. Since the beginning of fiscal 2004, Big Blue has posted $131 billion in cumulative net income, but saw fit to reinvest fully $124 billion or 95% of its earnings in its own balance sheet, which is to say, in buying back its own stock. ...
So how has it managed to keep the game going? In a word, by means of financial engineering. Its tax rate has been cut in half—from 30% to barely 15%. It has spent nearly $30 billion on acquisitions, repeatedly creating accounting reserves (i.e. cookie jars) at the get-go in order to insure that the dozens of small companies bought with cheap debt were highly accretive to EPS.
But at the end of the day, it was done by sacrificing its balance sheet. In 2004 IBM had $13 billion of net debt. Today the figure stands at just under $37 billion. And why not. IBM’s average weighted cost of debt last year was just shy of 1%. Thank you, monetary politburo!
Needless to say, under a honest free market in the financial sector, America’s once greatest technology company would not be functioning as a slush fund for Wall Street gamblers.
In the case of IBM, optimism continues to be the operative mode despite its obvious struggles. The cheering of the shrinking firm is harmonized at the macro level by the persistence of an "any day now" capex resurgence based on cash. That is particularly ironic given IBM's preferred mode of cash deployment which has nothing to do with capex and productive investment.
Given the changes taking place in the technological landscape, cloud adoption and SaaS among others, you might make the intuitive leap that such cash might be better used to keep IBM ahead of the curve (hardware, once the core operation, now a drag), or at least catch up in areas where it is clearly behind, rather than almost exclusively on share price. You can't "prove" a counterfactual, but you also can't help but wonder if IBM might have been better served with internal assets deployed with an eye more toward long-term expansion.
Toni Sacconaghi, an analyst at Bernstein Research, noted during a conference call that new signings of services deals were off substantially and that IBM has had nine straight quarters with revenue declines in services.
He also said IBM fell short of its executives' optimistic projections this spring about software revenue, which grew just 1%, while its operating-system revenue declined 13%. "They were very emphatic that software would improve this quarter," Mr. Sacconaghi said.
IBM has been particularly enthusiastic – that $68bn is $18bn more than the buybacks which, in 2010, it promised during the next half-decade. “Roadmap 2015” may be better known for another IBM promise, to increase earnings per share to at least $20 by that year (it reached $17 in 2013). But IBM also promised $100bn – or roughly what the Apollo space programme cost – of free cash flow during the five years 2010-2015. Looking back, between 2000 and 2013, IBM produced $165bn in free cash, and spent $140bn on share buybacks and dividends. ...
That is all very nice, but companies such as IBM cannot keep buying back shares and cutting costs forever. Overall in the US economy, the share of output taken by labour remains at a generational low. However, that means it may have bottomed, so bargaining power may return. Shareholders might prefer earnings growth to come from higher revenues (which could in turn require that cash is ploughed into the company, not paid out) rather than lower costs and fewer shares. But financial engineering, once begun, may be hard to let go of.
Probably not, according to Len Jelinek, a semiconductor manufacturing industry analyst for the global information firm IHS.
National press reports indicate GlobalFoundries is primarily interested in IBM’s intellectual property — not the physical plant in Essex Junction, Vt. — and Jelinek holds the same view. The firms already collaborate and share some patents.
Jelinek, however, is not convinced the potential sale is a done deal — or even that selling the chip-making unit would be in IBM’s best interest.
“I think there’s a lot of people running around with doom and gloom with regards to IBM’s chip manufacturing,” Jelinek said. “I don’t entirely subscribe to that.”
Druckenmiller highlighted what he called a "shocking" statistic about IBM: their sales are what they were six years ago. ...
Over that time, Druckenmiller said, IBM has tripled their debt load to buy back stock instead of invest in their business.
Buying back stock is a way that companies can improve their earnings per share, as it reduces the number of shares outstanding, thereby reducing the denominator when computing earnings per share — a company's net income divided by its shares outstanding.
The company still managed to beat Wall Street’s expectations on its preferred financial measurement of adjusted earnings per share, as it usually does. Big Blue has sworn to hit an adjusted $20 per share annually by the end of next year, a plan officially known as Roadmap 2015 and which employees call Roadkill 2015. With falling sales, the imperative to keep delivering higher earnings has meant imposing deep cost cuts, racking up debt to pay for buybacks, selling business lines, cutting jobs, and devising tax-rate cleverness—all at a time when IBM should probably be throwing everything it has at the cloud.
That conundrum, the subject of a recent Bloomberg Businessweek cover story, has boxed in Chief Executive Ginni Rometty ever since she was tapped to take over the company in 2011. Rometty talks all the time about how urgently IBM needs to transform for the era of cloud, yet her hulking, 431,000-employee organization has been slow to respond. To meet their computing needs, corporate customers are spending less on IBM mainframes and servers and more on computing delivered cheaply and flexibly over the Internet by the likes of Amazon. Falling demand for hardware is threatening IBM’s software business and the lucrative consulting work that often knits everything together.
Downsizings are nothing new for IBM, which employed more than 31,000 people in the mid-Hudson in the mid-1980s. The biggest cuts occurred in the 1990s, hitting 9,800 in 1996. This was followed by a modest rally to the range of 10,000 to 12,000 and a decade of relative stability.
Rodgers' wrote two books, The IBM Way, and Getting The Best Out Of Yourself and Others. He is in The Ten Greatest Salespersons, The Perfect Sales Presentation, and In Search of Excellence.
Selected comments from LinkedIn's "IBM Official Alumni Group: The Greater IBM Connection" group follow:
"The people in the field have to be a combination of analyst, consultant, applications specialist, technologist and salesperson - - and they have to be good in every area. Too many companies think of their reps only as salespeople, with their primary and perhaps only function being to persuade a prospect to buy their product."
"I never cared where a person was in the management hierarchy, but went to whoever I felt could provide me with the most timely and accurate response. I respected the individual's intellect and capability."
"We will do whatever is necessary to keep our people challenged and motivated; to assure that we have the money to invest in people, research and development; and to give our customers the best possible value. We will change everything except our beliefs."
"One of the real values of this sort of contention system is that while people may disagree, they don't have to compromise themselves in order to settle an issue. At IBM, it is called the 'right of nonconcurrence.' Once a decision is made, there's no animosity. It's not a game of win or lose; everybody is playing on the same team. Both line and staff are held accountable for the results."
"Not only do I give advice when asked, I also never hesitate to seek it. Yet for some people I know, asking for advice is more difficult than asking for money. . . .I also found that often the best advice comes from someone who brings to the table a totally different point of view."
Later that evening, my manager took me to meet Buck at his home. As a young salesperson, I was a bit intimidated to meet the legend. Buck welcomed us into his living room where we shared a beer and for an hour he asked me about my business, customers, thoughts about IBM. He was sincere, polite, no pretense and made me feel like I had met a new friend. I will never forget that evening. Buck Rodgers was a tremendous salesman, leader, motivator, and all around great guy. They don't make them like him anymore. He will be missed.
And IBM really doesn't do much of any of those things anymore...unless it costs the company $0 (i.e. an Intranet e-Card). And simply giving out free stuff is not a strong motivator (and it doesn't pay the mortgage either)... and usually it does more harm than good... insult to injury. IBM must continue to invest in its employees... and investments aren't free.
Salary, while important to everyone, really isn't at the top of many IBMers concerns. It's feeling that they're being valued and treated with respect. Instead, there's a continual lay off process that only leads to more concerns ("am I next") and more work for everyone involved (whether it's a short or long term impact is dictated by how talented an off shore resource may be). In my humble opinion, the changes that have happened across all of IBM over the past 10-15 years will never be "unchanged" in regards to how people are ultimately treated monetarily. I am comfortable in thinking that retention will be "the topic of the day" 25 years from now.
Second, an old adage is people join companies and leave managers. But there's a set of assumptions that go along with that. One of them is your direct manager can actually help your career goals and your work environment. The company has steadily gutted the authority of first line managers to the point they are little more than administrators and mouthpieces. They cannot stand up for employees identified for resource action. In many cases, they find out only hours before they have to notify employees. They cannot support their direct reports' career goals beyond their own network of contacts, informally, or beyond what their manager will allow, within the formal career paths.
A team member leaving of their own accord only draws attention if it has an immediate, significant impact on operations, sales, or execution committed to under contract. Otherwise, it's virtually unnoticeable beyond a second-line view.
Management only focuses on cost cutting, as a result the reason why a young hire would value IBM and stay even if proposed a better offer has disappeared: employee development programs, awards, worldwide TLE that enabled the top talent and executive talent to network and develop their knowledge. I would add to that the focus on managers, that can help the youngster to grow their skills and understand big complex IBM (remember the certification to ensure one is promoted manager if he has the skills,"LDC").
Of course all of that has a cost, but it is 10 times the value. Hope Ginni Rometty will be able to reactivate the basic principles to create innovation and value with the new generation.
My personal experience - which was within software group - included a number of frustration areas. Internal politics meant individual divisions were either competing directly with each other or worse forced to sell "by committee" with literally dozens of sales reps all turning up to the same customer meeting to lay out their stall.
Individually there was definitely a facelessness to the organisation, and a feeling that my individual efforts were not appreciated.
The hugely bureaucratic environment also meant that bringing about meaningful change was nigh-on-impossible. In today's fast-paced business environment a certain amount of agility is essential, and IBM has the agility of a battleship.
If you look at Big Blue's history, it nearly sunk itself before it was rescued by Louis Gerstner in the early 90's because it had grown beyond it's ability to sustain itself, and my feeling is it has grown again to an unmanageable scale. Time will tell but reading these views here does not fill me with confidence.
I survived at IBM for two years before finding a much better offer.
The dream didn't last long. Parker claims she was laid off one year later after she trained her replacement, a newly arrived worker from India. Now she has joined a federal lawsuit alleging the global staffing firm that ran Harley-Davidson's tech support discriminated against American workers — in part by replacing them with temporary workers from South Asia.
The firm, India-based Infosys Ltd., denies wrongdoing and contends, as many companies do, that it has faced a shortage of talent and specialized skill sets in the U.S. Like other firms, Infosys wants Congress to allow even more of these temporary workers.
But amid calls for expanding the nation's so-called H-1B visa program, there is growing pushback from Americans who argue the program has been hijacked by staffing companies that import cheaper, lower-level workers to replace more expensive U.S. employees — or keep them from getting hired in the first place. ...
The H-1B program allows employers to temporarily hire workers in specialty occupations. The government issues up to 85,000 H-1B visas to businesses every year, and recipients can stay up to six years. Although no one tracks exactly how many H-1B holders are in the U.S., experts estimate there are at least 600,000 at any one time. Skilled guest workers can also come in on other types of visas.
An immigration bill passed in the U.S. Senate last year would have increased the number of annually available H-1B visas to 180,000 while raising fees and increasing oversight, although language was removed that would have required all companies to consider qualified U.S. workers before foreign workers are hired. ...
The top users of H-1B visas aren't even tech companies like Google and Facebook. Eight of the 10 biggest H1-B users last year were outsourcing firms that hire out thousands of mostly lower- and mid-level tech workers to corporate clients, according to an analysis of federal data by Ron Hira, an associate professor of public policy at Rochester Institute of Technology. The top 10 firms accounted for about a third of the H-1Bs allotted last year. ...
Last month, three tech advocacy groups launched a labor boycott against Infosys, IBM and the global staffing and consulting company ManpowerGroup, citing a "pattern of excluding U.S. workers from job openings on U.S soil." ...
Infosys spokesman Paul de Lara responded that the firm encourages "diversity recruitment," while spokesman Doug Shelton said IBM considers all qualified candidates "without regard to citizenship and immigration status." Manpower issued a statement saying it "adopts the highest ethical standards and complies with all applicable laws and regulations when hiring individuals." ...
Last year, IBM paid $44,000 to the U.S. Justice Department to settle allegations its job postings expressed a preference for foreign workers. And a September trial is set against executives at the staffing company Dibon Solutions, accused of illegally bringing in foreign workers on H-1B visas without having jobs for them — a practice known as "benching." ...
Norm Matloff, a computer science professor at the University of California, Davis, agreed that age plays into it — not because older workers are less skilled but because they typically require higher pay. Temporary workers also tend to be cheaper because they don't require long-term health care for dependents and aren't around long enough to get significant raises, he said. ...
Because they can be deported if they lose their jobs, these employees are often loath to complain about working conditions. And even half the standard systems analyst salary in the U.S. is above what an H-1B holder would earn back home.
Of course, we could replenish the fund by raising the federal gasoline tax, which is its primary source of financing. That’s what Senator Bob Corker, Republican of Tennessee, and Senator Christopher S. Murphy, Democrat of Connecticut, want to do. But increasing gas taxes is unpopular, so Congress hasn’t done so since 1993, which means that the tax on gas has actually fallen 39 percent over the last 21 years after you adjust for inflation. Instead, Congress has used a series of gimmicks and shifts to keep the fund solvent as highway construction costs have risen.
The latest proposal, which passed the Republican-controlled House Ways and Means Committee on Thursday, works like this: If you change corporate pension funding rules to let companies set aside less money today to pay for future benefits, they will report higher taxable profits. And if they have higher taxable profits, they will pay more in taxes over the 10-year budget window that Congress uses to write laws. Those added taxes can be diverted to the Federal Highway Trust Fund.
Unfortunately, this gimmick will also result in corporations paying less in taxes in later years, when they have to make up for the pension payments they’re missing now. But if it happens more than 10 years in the future, it doesn’t count in Congress’s method for calculating budget balance. “Fiscal responsibility,” as popularly defined in Washington, ignores anything that happens after 2024.
I don't understand how they help American customers in Malaysia. How can your personal information be accessed by foreigners? How is that even lawful? I would think at a minimum that would violate HIPPA requirements. -Anonymous-
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