IBM may preserve some sales in the short term. But at what cost? IBM’s source code contains the secrets to its software -- and its success. By revealing that vital know-how to China’s government, which also owns most of the country’s biggest companies, IBM is potentially aiding its rivals and undercutting its own competitiveness.
It is estimated that the workload of more than half of the current onshore GTS IS employees around Europe will be moved out of the local country organisations and transferred towards IBM International Delivery Centres. This will require additional and substantial restructuring actions. Mr. Taylor and Mr. Van Groningen said that they expect that both voluntary and involuntary approaches will be required, orchestrated via a special ‘Change Program’ with concrete timelines to be further developed.
As in GTS IS, a fundamental transformation within the European GBS organisation was announced under the name ‘Fit for the Future’ to improve competitiveness by cutting labour cost. Also here, the EWC believes that an almost exclusive comparison with Asian players provides an unbalanced view of the situation. Via a special ‘Grow or Go’ program GBS employees should be identified who are fit to stay within the company or not. The EWC questions the validity of the underlying selection criteria, e.g.. four years or more in the same salary band or two or three consecutive PBC 2 ratings. As a result, the EWC foresees significant workforce reductions in GBS Europe for the coming years as well. ...
The EWC believes that IBM’s strategy of price matching with especially Asian Service Providers in both GTS and GBS will ultimately damage IBM’s reputation and might even lead to loss of experienced colleagues with ‘dark blue hearts’. The EWC calls upon IBM management to invest in our ability to differentiate on quality and position the company as a premium brand with high value add, rather than as one of the many low cost, commoditised price fighters.
The EWC concludes that over the past years, IBM’s cost cutting measures have never shown any discernible, positive impact on improving and sustainably growing the business. There is no indication that it will be different this time. Therefore the EWC requests IBM management to reconsider its current restructuring plans.
Over the past years, the EWC repeatedly drew attention to all kinds of issues arising from the current PBC system which negatively impacted both recognition and motivation of European employees. The EWC welcomes IBM’s intention to implement a new performance management system and tool, but wonders if the system is sufficiently culturally balanced as 26 out of the 36 so called ‘sponsors’ are based in Anglo-Saxon countries such as the UK and USA.
The sale is being explored as the emirate considers dumping some assets amid a drop in crude oil prices, according to the report. ...
The company employs about 3,500 workers in Malta and about 1,780 workers in East Fishkill. As part of the IBM sale in July, GlobalFoundries agreed to maintain a jobs pledge between IBM and New York to for 3,100 high-tech jobs in the Hudson Valley and surrounding areas through 2016.
The real story is that IBM management knows just what they are doing. They have the important numbers to back them up too. This is a mature company with one of the largest installed customer bases in the world - customers that look to IBM to help maintain their equipment and software, keep it secure, and continue to prop it up with add-ons that will allow it to continue to perform even as newer technologies enter the field. This moat gives IBM the staying power to plan on scales of decades, not months or years.
When all is said and done, shareholders should be interested in shareholder value enhancement. Anything other than that is simply myopic analyst syndrome, the eye on the wrong ball(s). As a shareholder, what do you want from your company? Growing revenues, every more complexity, new products and new markets at every turn? Perhaps that is what attracted you to Enron in its final years, but surely you have learned a lesson from that. I suggest that a wise shareholder should want results - results for the shareholder, not for the company. If a company can grow its EPS, grow its free cash flow per share, FFO per share, ROE and ROIC, then I am going to be a happy shareholder. I don't care if I own the world's largest company, the one with the most revenues or the most employees, or the fastest growing. I want the bottom line results to me on a per share basis to be good and to be growing.
Selected reader comments follow:
Using a static historic dividend yield to determine a future price target is not realistic. According to the chart in your article, the yield went from approximately 0.6% to 1.75%. I would suggest that this trend would continue going forward, and if I apply the ratio that 1.75 is to 0.60, and multiply that against the current yield of 1.75%, I find that the future yield should be 5.104%, which given a dividend of $5.60, would imply a price target of $109.72.
Attorney Sara Blackwell told The Register she has filed complaints with the US Equal Employment Opportunity Commission (EEOC) on behalf of 23 Disney employees who were let go earlier this year.
The complaints are the first step in what could become a class-action discrimination lawsuit against Disney. The deadline for filing the grievances under a title seven claim is Wednesday this week, 300 days after the techies were axed. The commission will then consider the case in full.
According to Blackwell, the IT workers' rights were violated when late last year they were notified they would be replaced by workers coming from India on H1-B visas. The outgoing staff were asked to stay on for several weeks to train their replacements, and dismissed in January of this year, we're told.
Blackwell told us that in addition to discriminating against the US workers on the basis of nationality, the dismissals included workers over the age of 40 and workers who are women, so age and gender discrimination are also being claimed in the EEOC filings.
What it also illustrates is that Google, Microsoft, and Amazon run faster than IBM when it comes to running normal, virtual machine workloads. It's the second year that IBM and VoltDB have played up the results of a benchmark using the Yahoo Cloud Serving Benchmark, an open source standard out of Yahoo Labs that tests a variety of workloads. ...
Damion Heredia, VP of platform services for IBM Cloud, called attention to the benchmark in an interview with InformationWeek November 18 at IBM offices in San Francisco.
The biggest group, those getting pink slips, were told to remain in the large conference room. Workers directed to go through what we'll call Door No. 2, were offered employment with IT offshore outsourcing firm Cognizant. That was the smallest group. And those sent through Door No. 3 remained employed in Cengage's IT department. This happened in mid-October. ...
The employees were warned that speaking to the news media meant loss of severance. Despite their fears, they want their story told. They want people to know what's happening to IT jobs in the heartland. They don't want the offshoring of their livelihoods to pass in silence.
The employees remaining at Cengage have begun training their replacements in person and via the Web. Their work is being "shadowed" and recorded. Their jobs will end in January. ...
Cognizant applies for thousands of H-1B visas annually, and is one of the top three users of the visa, according to government data. Cengage employees reached for comment didn't know what visa, if any, the contract workers in their offices were using. But they said some of these workers spoke a foreign language in the office, along with English. ...
The U.S. Bureau of Labor Statistics reported Friday that the labor market grew by 271,000 jobs in October. But Victor Janulaitis, CEO of Janco, a consulting firm that studies the IT labor market, says IT hiring has been weakening compared to earlier this year. ...
Offshore outsourcing is having "a fairly strong impact" on IT employment, said Janulaitis. Students coming out of college are facing trouble starting a career "and a lot of that is driven by jobs that are taken by non-U.S. nationals in our economy, and a lot of that is H-1B [visa holders]," he said.
"Why are we talking about more H-1B visas for people when we have people who are unemployed?" said Janulaitis.
I'll admit up front that my personal bias to IBM has been rather negative for some time now, and have never owned the stock. I see IBM as a diversified, peripheral technology player that seems to have developed somewhat of a "jack of some trades, master of none" position in the tech sector since jettisoning its PC division over a decade ago. To an extent it may be argued that IBM is throwing spaghetti at the wall, hoping to gravitate to where it sticks the best. ...
Although IBM represents the kind of stock I'd like to own from a quantitative perspective, I am left grasping for specifics to what will create sustainable organic revenue traction for the company in the years ahead. Some investors like to take the position that just because a company has had success in the past or has gone through a prior reinvention, that history must repeat itself at some point. ...
IBM is a company with a rich history that is optimistically viewed as being in the process of reinventing itself. If one wishes to take the opposite view, it can be argued that reinvention is required only of companies that fall behind due to lack of vision. As a result, they are forced to constantly play catch up to others.
Selected reader comments follow:
I wonder how many people buy IBM and stick with IBM not because they really understand and appreciate anything about the company and what it does, but because Warren Buffet is in. My bet is that if he reduced his position, there'd be a panic as others rush to sell too. In other words (and sorry if this offends anyone) many IBM investors as not so much savvy as they are sheep.
Surely, IBM Research can optimize this. I don't think the MBAs can. My uninformed guess: when the beast gets to be very large it can survive only by digesting lots of little animals with some really neat ideas. Nothing new in that. I am reminded of Buffet.
Companies with innovative workplaces where employees have the opportunity to thrive will always outperform their rivals. My investment in ACN has proven this to be the case as ACN has far outperformed IBM over the last couple years. IBM is trying to figure out its place in the new order and in the mean time is losing market share in areas it had previously excelled at to companies like ACN. Now it wants to be a cloud provider...good luck with that.
The key problem with IBM is that it has a "me too" management. It doesn't see new changes taking place in the technology environment but after new things like cloud, social, big data, etc. have emerged and have been going successfully for other companies for 5 years or so IBM says "me too" and it fires all their employees from an old business and tries to jump into a new one that many other companies are well established at. In such a climate IBM is doomed to failure.
They NEVER have an original idea of their own. All they do is see what other companies have done that has been successful for many years and then try to jump into that new field; all the while treating their employees with disdain and hatred. Believe me, IBM is a nightmare you want to stay away from as far as possible. I worked there. I know.
You, as a former employee, for sure have an insider view. That is useful no doubt. But put it in context. Does your inside view really span the entire company? How can you be sure that "everyone is scared to have an idea" or that "management hates everyone". Please don't take this personal, but your view seems quite biased from your personal experience and from your area or division of work.
I know other people from IBM who don't share that view. In fact if everyone was so unhappy, why don't they all leave and work for Apple or Amazon?
Most investors are "outsiders". They don't have a personal experience and with that they are freed from that bias, and free to focus on the fundamentals (and I don't mean just the financial metrics) that are publicly available, including viewpoints from insiders if they choose to share them.
I’ve been told another big Resource Action (IBMspeak for layoff) will be starting in January, ultimately costing the company up to 30,000 heads. This will be accompanied by a change in IBM’s 401K plan, either reducing or eliminating completely the company’s matching funds. The cuts will be coming mainly in IBM’s Global Technology Services (GTS) division which is responsible for 60 percent of the company’s revenue. These announcements will be accompanied, no-doubt, by additional cloud investments, the idea being to sell investors on the idea that IBM will make up in its cloud business what it inevitably loses in GTS.
This will represent a significant strategy shift for IBM. For one thing, it’s Big Blue essentially abandoning its largest current business. GTS customers are already unhappy with IBM’s quality of service so what will be the likely effect on those customers of taking 30,000 more bodies from their already lousy service provider? ...
But the bottom line for IBM seems to be a future in cloud and security (and mainframes, as a couple commenters point out below — that’s not going to change, but neither is it going to get any bigger). To do that with characteristic Armonk gusto, Ginni will use the 401K savings as well as division sales, if any, to bankroll a major cloud expansion, hoping to leapfrog Google and Microsoft and move into the #2 position behind Amazon in that sector. Alas that’s #2 in a business that’s nowhere near as big as what IBM is abandoning, so the company as a whole will continue to shrink. Share buybacks will continue, the dividend will continue to go up, but there will come a point when IBM is a $40 billion cloud and security company. Maybe that will be a good thing, but what it won’t be is a consequential thing. It’s the end of what used to be IBM.
Selected comments follow:
If you employ experienced, battle grizzled veterans. A greybeard comes in, sorts out the problem and moves onto the next job by the end of the week. Not great for revenue, nor profit.
So the management “resource adjusts” him – and hires some H1B’s at a third the salaries. The “team” comes in to the client. By the end of the week, they have barely figured out to operate the coffee machine. By then of the month they make some progress, but not enough. So they pull in a project manager to manage customer expectations.
How I love that term "they put on more “resources”. By the end of the quarter they have convinced the client that the problem is really complex and that additional hardware is required, and then software and then packages. By the end of the year, they have 40 people working flat out. Still nothing usable delivered. Now that’s how you have a big profitable business. Shame about hardly ever delivering results: http://spectrum.ieee.org/static/the-staggering-impact-of-it-systems-gone-wrong
I agree with Cringley, they are complete toast as a company. The same miserable (non-technical-corporate-politician) management team spinning repeated prognostications of their ‘strategic initiatives’ and ‘moving to higher value’ is enough to cause digestive malfunction. Amazing that for this long, Wall St. has bought this garbage but my intuition says this is changing. For anyone having spent more than a few years on the inside, the charade is as clear as looking through a glass of spring water.
Even worse, they will continue to try and sell this stuff to companies whom they have royally pissed off in the past 10-15 years. Not sure if that is narcissism, denial, desperation, or a combination of all three.
As a now-retired 5-year IBM employee, I experienced this firsthand and observed many other iterations of it. In my case, I was one of 120 who were re-badged to IBM as a part of the SO contract terms. Roughly 85% of us had a 1-year employment guarantee, and those deemed “business critical” had 2-year. Immediately they downgraded some from exempt to non-exempt, and within 1-2 *quarters* they began dumping people as the work was moved offshore.
I moved into a new position of my own choice, and after 1.5 years that job was offshored. Management moved me into a job I hated, then after only 6 months I was RAed. The very same day I was un-RAed, and management again moved me into a similar job that I also hated. Fortunately I was able to retire within a few months.
Horrific, though I know it was worse for others. BTW, the internal GTS tools and procedures were nightmarish. Cases in point: SA&D, ITIM Vault, CIRATS, RCA.
Pros: Good work life balance, great insurance coverage and benefits (not including bonuses, which are notoriously terrible). They care about their employees in a lot of ways (but not others — see cons).
Cons: Horrible culture - working remotely (as 60% of IBM does) is nice but you can go years, if not your whole tenure at IBM without ever meeting your boss or peers face to face. In addition to the faceless factor, for a company that trades on "innovation" the culture and environment are anything but that. Antiquated, old school, conservative and top down to the fullest. People are often lifers at IBM and that has some drawbacks - old perspectives, outdated management styles, leadership that is out of touch with the bleeding edge.
Advice to Management: Learn from startups and embrace design thinking.
Pros: Training (world class with a lot of variety). Name recognition.
Advice to Management: Get proper management training; your teams must have some of the highest turn-over in Dublin. Stop thinking that IBM matters as an employer as it used to in the past; people don't care. They care about getting paid market conform salaries, getting respect from their employers and being taken care off in terms of benefits. You are in a highly competitive job market in Dublin where most companies pay better than you, offer benefits, and are not situated almost outside of Dublin. (County Meath is on the other side of the field on the campus).
http://www.endicottalliance.org/thedisintegrationofemploymentinIBM.htm To all Alliance supporters, send and share the above link to the article "The disintegration of employment in IBM" far and wide. Put it on your FaceBook page; send it to newspapers; send it with comments to your political reps and send it to your co-workers. Help break the secrecy of IBM job cuts. Put some pressure on IBM. -Alliance-
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