In 2000, before the .com-fueled tech bubble burst, IBM maintained 153,587 workers in the U.S. It was also the last year in which it saw a year-over-year increase in its domestic headcount.
IBM since the mid-1990s has been aggressively expanding operations in low-cost countries and regions like Brazil, Eastern Europe and Asia—most notably in India, where tech salaries are less than half of what prevails stateside. Estimates put IBM’s headcount on the subcontinent as high as 150,000—or roughly double the number of workers it employs in America. That’s up from about 50,000 a decade ago.
“The notion of IBM as an iconic American tech company is passé,” said veteran industry watcher Rob Enderle, principal analyst at The Enderle Group. “It remains iconic but this is a company that can shift resources globally at a moment’s notice.” ...
IBM executives have defended the company’s paring of U.S. jobs and overseas expansion by noting that it needs to control costs while building a presence in the world’s hottest growth markets. In the most recent second quarter, IBM reported revenues from Asia-Pacific markets of $5.3 billion, more than a fifth of its total Q2 sales of $23.9 billion.
Critics say IBM is merely engaged in labor arbitrage, seeking skilled tech workers at the lowest possible cost regardless of location and impact on local communities. “This is about shifting work and cutting costs,” said Lee Conrad, a spokesman for Alliance at IBM, the pro-union group. “IBM will never again be the big powerhouse in the U.S. that it once was for employment.”
An IBM spokesman dismissed the claim, calling the Alliance “an ad hoc group that doesn’t represent the workforce at IBM.”
The Chinese tech firm will finish the acquisition with a closing purchase price of $2.1bn, which is a little lower than the original $2.3bn price tag because of a change in the valuation of Big Blue’s server inventory and deferred revenue liability, Lenovo said. ...
As part of the server biz deal, Lenovo will also partner up with Big Blue on storage and software, becoming a reseller of IBM products including Storwize, LTO, Smart Cloud and Platform Computing.
There are four investors in a corporation: customers, employees, shareholders and the society they cohabit: customers invest in products and services; employee-owners invest their time and skills; shareholders invest their money; and society governs the corporate rules of engagement.
Selected reader comments follow:
You are correct in saying 'until management corrects the morale issue, nothing else will be fixed.' Those spewing 'shareholder value' and 'IBM is undervalued' dogmas simply do not know the lay of the land as viewed from within. If Ginni and her c-suite team do not right the ship from a 360 degree stakeholder perspective, those dogma spouters will inevitably see the internal reality go external.
Regarding "Buffett's dilemma of owning IBM", you know as well as I do, that the minute he makes any negative comment about IBM leadership or sells any of his shares, there will be a drop in price. And we know it would be difficult to sell this many shares incognito. If like many of us do think IBM needs leadership change, he needs to mount a clandestine operation to have them replaced or else, share price could go in any direction. Not sure he would like that uncertainty. Does not seem to be his style to interfere anyway.
Regarding the share buy-back program, I was reading an interesting article in The Economist of September 13-19 Business section and the damage it can do to a corporation's future when buy back is excessive. According to their article, IBM had the 3rd largest share repurchase program (in $$) of $100+ billion between 2004-2013, as shown in their chart, representing 64% of cash flow from operation. Add the dividends to that number and that does not leave much to reinvest in such a large business. Only ExxonMobil and Microsoft repurchased topped them in dollars, but it represented 45% and 50% of their cash flow, respectively. The only other large organization repurchasing more as a % of cash flow, was CISCO with 69%. And we know how well they are doing as a company and how well their stock has performed, although if I am correct, they are still flush with cash. Doesn't that tell us something?
BTW, as I have stated before, I do not have any gripe about how IBM treated me, while I was there or when I retired. I see problems as an investment potential with what I observed. I also made serious IBM investment through my transferred 401K and was excited when Buffett invested the same year as my transfer. I held this investment until May 2014.
I think Pete and others (like myself) are bringing serious potential risks that all investors should analyze for themselves.
If you think that share buy-backs create more value than investing in new development and innovation, not treating its employees (main assets) in a manner conducive to increase productivity/creativity, being stuck into cumbersome internal processes that stifle everything... and I could go on.
Regarding their financials, from what I have read elsewhere, my impression is that they are achieving earnings per share and other financial metrics through capital manipulation, and not organic sales growth. Buying back shares and selling off business units versus seeing sales grow from superior product mix and outstanding customer orientation are two different paths to the same short term outcome, but yield two very different long-term outcomes. At some point, in the first case, the mast you have been hacking at to patch holes in the ship can no longer hold up a sail.
However, there are no guarantees going forward.
Gerry Smith, executive vice president of Lenovo Group and president of Enterprise Business Group and Americas Group who will oversee the combined server businesses of Lenovo and IBM, said in a conference call that Lenovo would stand by stated previous commitments to hire all IBM workers. ...
Parker also reiterated Smith';s comments about jobs. "What decisions will be made over time is not known," Parker said, noting that decisions will be made about driving sales, growing revenues and finding efficiencies.
IBM Lotus 123 Millennium Edition, IBM Lotus SmartSuite 9.x, and Organizer have now officially all passed their end of life support date and, according to IBM's website, "No service extensions will be offered" – not that anyone is seriously using the spreadsheet any more.
It's a sadly muted end for what was, at one time, the world's premier spreadsheet. Lotus 1-2-3 was one of the first applications that made IBM's original PC a serious business tool, but it fell by the wayside due to poor coding decisions, failure to adapt, and the crushing tactics of Microsoft.
Pros: A number of opportunities, especially international. Technology expertise world class, as expected. Many of the people who work there are top notch in more ways than just their expertise.
Cons: Still too much management dead wood. Decreasing revenue. Laying off intellectual muscle. You are always 60-90 days away from getting "resource actioned" (laid off) at any given time. Customers often overwhelmed by sales team "show of force" (too many sales people at meetings).
Advice to Senior Management: IBM needs organizational innovation more than it needs technology innovation. Organizational arrogance is still a problem, especially in sales.
Pros: Watson has phenomenal technology that inspires with a brilliant team you work with everyday. Market demand pushes opportunities into the door more than the company can handle which is a good problem to have.
Cons: Bureaucratic and Political. Too few leaders and too many authoritative managers that cannot lead. Culture is trying to change and be more like Google and Apple but slow to move ahead.
Advice to Senior Management: Focus on client relationships, team relationships, and building an environment where public and corporate pressures on numbers do not negatively impact the dynamics.
Pros: Good benefits, good work life balance. Except to get what you would get at any large American corporation. The benefits are good, the network is large, there are opportunities to work remotely.
Cons: No training, not great work environment, no mentorship. IBM is a factory for entry level work. Tons of people leave after a year or two in the organization. The people that stayed for longer in the consulting world were not very happy at the company and they showed it. It was hard to find people who had been there for an extended time and were happy with their jobs. I didn't know any.
Advice to Senior Management: Create career pathways. Get people on remote consulting projects more involved with other people. Assist with B-school payments so people are incentivized to come back.
Advice to Senior Management: You have lost the trust of customers and employees. It's too late to repair the damage. A senior leadership change is needed.
Pros: Lots of opportunity to move to new assignments and shift career paths over time. Great maternity and part time programs. Colleagues are mostly knowledgeable and competent, with some exceptions of course.
Cons: Executives from different parts of the company don't always cooperate, causing conflict and chaos with plan churns. Performance measurements are frequently out of employee's control, and ratings (and bonuses and raises which are based on this) don't typically reflect the hard work that is done to keep slower growth or declining businesses viable.
Advice to Senior Management: Need some new SVPs who collaborate and cooperate better to integrate across divisions, product lines and services. Not rewarding top performers in poorly performing businesses makes it very easy for them to leave only to hurt the business more.
Pros: IBM was a fantastic company to work for and provided plenty of opportunity for skills development, learning, and career growth. It also seemed to me that employees got out of IBM exactly what they put into it. Some just coasted along and got "average" performance reviews for average performance. But for those who really want to feel like they are making a difference and want to expand their career, IBM will support them full stop. NOTE: This review is based on my work with Software Group within IBM, which tends to be much more progressive and faster paced than other groups.
Cons: The growth of my career and opportunities for development were directly proportionate to how progressive and open minded my direct manager was.
Advice to Senior Management: Processes and policies are the cornerstone to any solid company. Continue to ensure they don't get in the way of employees being able to create and innovate.
Pros: It is a company that you could work at for a life-time, as long as you keep your nose clean and your opinions to yourself... ensure that you are very politically aware and make your line management look good.
Cons: The business has become FAR too political given cut-backs to resources across the board, especially with weak performance from the 'Systems & Technology Group' and downturn in IGS signings/renewals. The BEST caliber of executive management has left IBM to work for other transformative or startup companies, leaving a layer of less effective sales managers and sales operations running the business.
Advice to Senior Management: Honesty and transparency with employees.
Pros: When I started at IBM it was an amazing place to work. Great group of extremely dedicated talented and driven people. Superb, world-class education available to all employees, great culture, IBM had the world by the tail. That all changed when Sam Palmisano took over as CEO in 2001.
Cons: Sam destroyed the company via lack of vision, extremely poor leadership, and excessive cost cutting. IBM internally is now a terrible place to work, with constant layoffs and a culture of fear and intimidation. They are so tied up in their own bureaucracy that they can't get anything done quickly. Many of the superb employees have left and those that are left are afraid to do anything for fear of losing their jobs.
Advice to Senior Management: The company needs someone like Lou Gerstner back at the helm. Gini Rommetti is just a "yes (wo)man" for Sam and is not strong nor innovative enough to lead the company out of the dire straits they're in.
Alliance reply: You are spot-on...except for one detail: We (CWA) need to *prove* that a majority (51% or more) have signed up or signed cards in favor of a union. We need to *prove* it to the National Labor Relations Board. That's federal law and we MUST obey it or we cannot request a union election any other way. Problem: We (CWA) don't have 51% or more of the IBM workers (non-management) signed up for the Alliance@IBM CWA Local 1701. We've preached this and reiterated this point, over and over and over and over, for 15 years. When IBMers realize that they have the power to make this happen, that's when it will happen. If you support a union for IBMers then do your best to organize your co-workers and tell them what we've said here. It's up to you and all the supporters and members of Alliance@IBM to get this message out. We will continue to do the same as long as possible.
Alliance reply: We have attempted that in Fishkill and in Vermont and at some stand-alone sites. We haven't gained enough verifiable support. And what we mean by verifiable support is workers taking the step of joining the Alliance in any of our 3 membership categories. We can't base support on wishful thinking.
Dear Anonymous in Microelectronics. I'm the author of one of those Dear Colleague letters. IBM Micro is losing talent so quickly that I wonder if they will be able to deliver the chips for the the next series of mainframes after this current batch. Sam and Ginny may have killed the the goose that lays the golden microprocessors that enable the big iron mainframes for Big Blue. I agree with you. IBM Micro is being hit by many self (IBM corporate) inflicted wounds.
Unlike the rest of IBM (average tenure about 5 ears), Micro has a large fraction of the employee population that are retirement eligible and are 2nd choicers. These employees realize that once they hit 30 years they are effectively throwing away that pension check each month unless they get a job somewhere else and retire from IBM, leaving a skills vacuum in their wake at Micro. Many, many more employees are just fed up with the poor morale, constant feeling of dread and seeing the purchasing power of their annual wages falling each year. They have decided to act with their feet and leave.
I've been a paying member of Alliance for years. If all those Micro employees who are leaving now had taken the action to be Alliance members before they got so fed up that they took the action to leave IBM Micro then things might be different. -BFL-
Each plan has different out of pocket max. You can also used your own money to supplement the cost coming out of your FHA, in increments of 10 percent. In my case 50/50 would have meant I paid $400.00 and $400.00 comes out of your FHA, which would allow your FHA to last longer, but remember, the FHA is not guaranteed. Also you can change plans during the enrollment period each year. Hope this helps. -Use Your FHA or lose it-
Note that the lowest premium cost plans (named "high deductible", both with and without HSA) do not provide "creditable coverage", so if you choose one of those plans then the premium cost of Medicare Part D (i.e. drug insurance) will be permanently higher when you transition to a Medicare "Part D" Prescription Drug Plan (PDP) at age 65. So the year you turn 65 (and perhaps the year before that?), you may want to avoid the IBM High Deductible insurance plan in order to avoid the permanent annual premium penalty that the US government mandates. I don't know how big the penalty is.
Besides premiums and deductibles, a key difference between the 2014 IBM plans was the maximum benefit limits imposed on drug coverage. The Low Deductible PPO plan had no drug coverage benefit limit (i.e. unlimited), the Medium Deductible PPO plans had $2500 benefit limit, and the High Deductible PPO plan had $1000 benefit limit. So for catastrophic drug coverage (in case of heart disease or cancer or something like that which requires expensive drugs for a long time), the more expensive "Low Deductible" plan provides more prescription drug protection. -Paul Bergeron-
This site is designed to allow IBM Employees to communicate and share methods of protecting their rights through the establishment of an IBM Employees Labor Union. Section 8(a)(1) of the National Labor Relations Act states it is a violation for Employers to spy on union gatherings, or pretend to spy. For the purpose of the National Labor Relations Act, notice is given that this site and all of its content, messages, communications, or other content is considered to be a union gathering.