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Tuesday, March 4, 2014

IBM Slashes Jobs

IBM was once one of the country’s largest employers. Considered a major innovator in the high tech world, IBM was also a place where workers could count on having a job throughout their entire career.

But IBM is now going through a major restructuring after sustaining years of losses. These changes could result in some 13,000 layoffs, both in the U.S. and abroad. Some of these layoffs have already started, but the company will not confirm any numbers.

The Guardian’s Heidi Moore has been covering this story and joins Here & Now’s Robin Young with details.

IBM declined to be interviewed, but sent Here & Now the following statement:

As reported in our recent earnings briefing, IBM continues to rebalance its workforce to meet the changing requirements of its clients, and to pioneer new, high value segments of the IT industry. To that end, IBM is positioning itself to lead in areas such as Cloud, Analytics and Cognitive Computing and investing in these priority areas. For example, already this year we have committed $1 billion to our new Watson unit and $1.2 billion to expand our Cloud footprint around the world. In addition, just this week IBM announced a $1 billion investment in platform-as-a-service Cloud capabilities, as well as investments in areas such as nanotechnology which will bring hundreds of new jobs to New York State. This also creates new job opportunities at IBM. At any given time, IBM has more than 3,000 job openings in these and other growth areas in the US.

IBM’s total workforce has remained stable over the past three years, and IBM now employs more than 400,000 people worldwide.





IBM Big Blue was once one of the country's largest employers, a major innovator in a high-tech world, a place where workers could count on a job for life. Then IBM missed the first wave of the PC revolution later. It was late in investing in cloud computing. It's now going through a $1 billion restructuring after years of losses. And workers say IBM is laying off workers to meet an impossible to meet pledge to Wall Street.

The Guardian's U.S. economics editor Heidi Moore has been writing about this. She joins us from the NPR studios in New York. Heidi, welcome.

HEIDI MOORE: Thank you. It's good to be here.

YOUNG: And we - let's just say, we contacted IBM. They declined to speak with us today. But they sent a statement. We'll post it in full at hereandnow.org. They say they're actually expanding. So weigh in for us. What is this pledge that IBM made to shareholders in 2010?

MOORE: Sure. They promised that they would get up to $20 earnings per share by 2015. They call it the 2015 roadmap. Right now, their earnings per share is about $14, and they've been working on getting it that far for four years. So in the next year, they have to get from $14 to $20 earnings per share. And it's a tall order because IBM sales have been slumping for six straight quarters, and their growth has been slowing as a company. And they're not doing that well in hardware, which was traditionally their strength - things like computers and all of that.

So right now, they have this almost impossible-to-meet goal that they've committed to Wall Street. Wall Street doesn't quite believe it's going to happen judging by how much IBM stock price has fallen. And so that's resulted in some really deep cuts, not just in the U.S., but also globally, in Asia, in Africa and in India, where IBM expected to expand.

YOUNG: Well, so employees are calling this a deal with the devil. It sounds like you agree with what they're saying that IBM is now laying off workers to try to meet that share price.

MOORE: Yeah. Well, I think that, you know, I mean, staying away from sort of the moral judgment of it, of course, employees are furious, and have been for a long time, because IBM was almost a motherly company. It was a place where you used to stay for 20, 30 years. And for employees to be tossed out is incredibly traumatic for them.

But also, for IBM, I would say that the plan is, you know, empirically, you can just say it's incredibly overambitious. It would take a great deal for them to meet this target. But, you know, similarly, for them to say that they can't meet the target is going to end up in some pretty painful punishment from Wall Street. So it's kind of a little - a shadow area of delusion right now.

YOUNG: Well, you say IBM has gotten themselves on a hook they can't get off of. Again, we had a statement from IBM. They say they're expanding. And we read that in upstate New York where whole towns like Endicott - you write about Endicott - have depended on IBM. Governor Cuomo announced in February that IBM is going to preserve 3,100 jobs in the Hudson Valley, add 500 jobs in Buffalo through a new state-owned center. Let me see if I can do this - the Buffalo Information Technology Innovation and Commercialization Hub, and that IBM is going to be the first tenant, bringing 500 new jobs. So, you know, they say they're bringing jobs.

MOORE: Well, their headcount has overall declined modestly this year. So they're not actually bringing jobs. But it is fair for them to point out, because they are investing in other areas, right? And so, for instance, they're investing in the cloud, you know, you've heard Amazon and Google talk about the cloud, the area where we store all of our information essentially on servers. And they're investing $2.2 billion in that.

You know, in the case of the jobs added in New York, some of those are replacing jobs that IBM cut last year. And they cut something like 700 jobs in New York not too long ago. So the promise to the state actually restores some of those jobs in addition to bringing more jobs to New York. I don't think anyone is going to argue that that is great.

But what is inarguable is that as of this moment, the jobs that they're cutting are probably far above the jobs that they are currently planning to add. And another, you know, sort of comparison point is that IBM is spending $20 billion to buy back its own stock. And that's because to get to $20 earnings per share, they're essentially making sure that there are fewer shares out in the market. So they're trying to get that number through another way. And you can just imagine if they're spending $2 billion on, you know, improving their cloud offerings, imagine what spending $20 billion on buying back their shares means.

So it doesn't indicate that IBM necessarily has a shortage of money. It just indicates that they are very committed to this strategy of getting very specifically to the number of $20 earnings per share.

YOUNG: A cautionary tale about making promises maybe you can't keep. Heidi Moore, U.S. economics editor for The Guardian newspaper, thanks as always.

MOORE: Thank you.

YOUNG: And, Jeremy, you have news about someone who is willingly leaving his job.


That is true. Some bittersweet news from NPR today. Carl Kasell, longtime NPR newscaster and WAIT WAIT...DON'T TELL ME! announcer, is retiring. He will do his last show, WAIT WAIT...DON'T TELL ME!, this spring.

YOUNG: What?

HOBSON: We just got this tweet from Peter Sagal, the host of WAIT WAIT...DON'T TELL ME! He says: Really big news from us. We're losing any pretense of dignity we ever had.


YOUNG: Well, we know - get your recording machine requests in soon.

HOBSON: Exactly. That's going to be the last time, I guess, that he's going to have to leave his voice on listeners' answering machines, and hopefully he's happy about that. Enjoy your retirement, Carl Kasell.

YOUNG: Right. Well, it won't be till this spring. Transcript provided by NPR, Copyright NPR.

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  • papoon

    I thought I heard mention of something called the *B*uffalo *I*nformation *T*echnology and *C*ommunications *H*ub–say what?

  • BHA_in_Vermont

    You mentioned cuts at IBM Endicott but then said they are preserving jobs in the Hudson Valley. I worked for IBM for 34 years before involuntarily retiring last July. The location I worked at now has about 4,000 people having laid off ~550 in the last 6 months, a few years ago the site employed 8,000. The number of IBM employees in the Hudson Valley was over 12,000 at one point, it is about 7,000 now. IBM is as guilty of “off shoring” jobs as any manufacturer of clothing or other goods. Many of the technical, non manufacturing, jobs are now in Mexico, Brazil, Vietnam.

    IBM sold off the PC business to Lenovo (China), then the ThinkPad and recently announced they are selling the small server business to them as well. That doesn’t leave much in the way of hardware since they chucked the disk drive and printer businesses many years ago. And there has been much talk of selling all or part of the chip making business. So they are going to make their “promise to Wall Street” on “services”?? I have my doubts. Part of the reason people used to buy IBM services was because everything came from the same company, hardware, software, services – all coordinated. Why buy IBM “cloud” services vs Google’s, Microsoft’s or any other? There is no “whole package” reason and IBM is late to the “cloud game”.

    • SirLee_V

      This is exactly right. IBM used to be the go to company as they had everything you needed in house. I could get everything from workstations , to servers, switches and such for the network to connect them all, and then use IBM’s software to run everything. And, it would all work together with minimal fuss and effort. They were the one stop shopping for all enterprise IT needs.

      Now we have to piece everything together and hope it all works. IBM has been seeing a lot less of our business over the last ten years. The only IBM gear and services we are using now are old legacy stuff that with any luck will be retired soon. We used to be a 90%+ IBM shop.

  • Frog

    IBM buying back shares to increase their earnings per share. This is a really good point how companies can make it out like they are doing well when really they are only shifting money on their balance sheet.

  • Anon

    When did IBM post a loss??? They make higher and higher % profit each year. The firings are to increase that to meet the 2015 roadmap for earnings per share.

    • Frog

      They are still profitable but in 2013 revenue is down, gross profit is down and net income is down.

  • Frog

    Warren Buffett’s Berkshire owns 6.2% of IBM. He seems content with the investment:

    “The revenue trends have been less than anticipated – although not dramatically less than anticipated. The financial performance has been pretty good but it’s been helped by low tax rates and things of those sort. There is a transition going on in the business, particularly in terms of the cloud. It’s fair to say that I know less about the future of IBM than I might know about the future of Wells Fargo or Coca-Cola or the [other] businesses we own. I think I do know enough it to still feel good about owning the stock.”

    “Low tax rates and things of that sort”? IBM apparently paid only 5.8% net after lots of tax gimmicks. Quite a bit less than his personal secretary’s tax rate, huh? Does he complain? Nope. Buys more. How does this square with Warren’s call for increased taxes on those that can afford it? Scrap the code.

  • Former IBMer

    Regarding the “deal with the devil”.
    Some people listening in may think this this is just another case of disillusioned workers yearning for the golden days in which their company valued them first and then Wall St second. It is like this, but it is so much more. As a former IBMer now working another high tech company, I can say with confidence that its hard to imagine any other high tech company with such blatant disregard for the morale of the employees.
    IBM has mandated quotas for lower performance reviews, so that a former high performer is told their performance is now just average; when this happens, the employee is now not eligible for bonuses, and more are eligible for “resource actions” (layoffs). This is happening to employees who have had increased demands to pick up the slack from coworkers who have left or been forced out, with no replacements for the position. Many years there are no bonuses at all for the average worker due to IBM’s financial performance, while the executes make millions in bonuses, typically from their stock options (not coincidentally, they are rewarded by the same earnings per share offered to the shareholders). Long time IBMers are often let go not too long before their retirement. I could could on and on. So it is not surprising that employees refer to the time they get let go as “liberation day”.
    IBM has made a conscious decision to value the shareholder over the employee. So be it. The thing is, every other tech company that I have come across actually values their employees (at least in comparison to IBM; maybe I don’t have a good yardstick), because their employees are what makes them succeed; they are one of their most important assets. IBM not only puts their employees a distant second; they do the same with their customers, too. This is the price of putting the short term interests of Wall St over their long term interests, and I think this has to be a dead end.

  • jonathanpulliam

    What do you expect from a company whose first big plant was built in Europe based on IBM chief Watson’s energetic and successful pursuit of the lucrative 1933 National German Census contract, which enabled in a technical sense, the Nazis to trace Germans’ ancestry back 4 generations using punch cards developed by IBM licensee-subsidiary Deutsche Hollerith Maschinen Gesellschaft. The IBM shareholder presumably obtained a lucrative return, while those flagged as descended from Jews using the new IBM technology went instead to their deaths at the hands of IBM’s loyal customers and their perverse Nazi racial policies.

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