Did the RA’s change IBM’s course For moving forward

I know folks are very cynical of IBM’s actions and trust me been there done that (class of 2016) BUT the real question is was there a game plan to it vs just reducing costs across the board. In My 2016 experience it was just a cost reduction exercise, and no change of course. This RA seems to have a Slight strategy behind it (mostly eliminating Redhat vs IBM legacy overlap, which most likely should be expected after spending 34 billion.. The decimation of Power in Austin was not a “move folks from high cost to low cost”, but rather a “we don’t want to be in this business anymore” action. The final question is did IBM fall back on their old ways when it comes to GBS/GTS and just remove costs, or did they strategically go after costs. There is evidence for both. IBM had RA’s in China and India (China ended in April, while India had them when the USA had theirs). (see EE times articles). The non-confirmed posting of TSS moving to Costa Rica would certainly be the “old” IBM strategy of shopping for lower cost. Thus again I ask does anyone see a strategy via the man behind the curtain?
I will add one interesting tidbit. If we run the known numbers we get, IBM took a 900 million dollar charge in 1st Q, which equates to a 23k Headcount reduction at 45k a head. (USA fully burdened cost of 180k per head). The CFO said he was looking for 2 billion in savings which says 1.1 billion must still be accounted for. He also said the 1.1 would be self funding from operations. If we use the 1/3 rule (110k America’s, 120k Europe/Asia, and 120k India) And factor in the 4 to 1 cost advantage (1st world vs third world) then the shift of heads to 3rd world pay for any impairment costs incurred. Thus 2 billion at 45k nets 45k heads impacted with 3rd world going up at the expense of 1st world. The exiting of commodity HW (Power and possibly storage) would result in another possibly 3-5k reduction. 1k plant for each HW product, with 1k sales/channel in America’s and Europe/Asia. This would be self funding via the fire sale of the HW manufacturing business and IP sales. This all nets to 50k impacted after the dust settles. Now IBM has a lean go to market machine focused around Cloud, LINUX, AI, Enterprise, and REDHAT, Does anyone see that the RA was structured to support this plan?
Finally folks are speculating about a 2nd round. I would speculate IBM isn’t after anymore streamlining of their go to market strategy, but rather shopping “perform” services (think commodity body shop services already in India). That would mostly come out of Cognitive, GBS, and GTS. Perhaps 60k heads total. I would expect IBM to cut a deal with one of the body shops already in India. Thus no impingement charges. Again just a speculation

Any

#Layoffs #India #CostaRica #Rumor #Speculation

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IBM never has a strategy beyond "maximize EPS and FCF for the current quarter, and to a lesser extent for the remainder of the current year".

@1xdj those are some interesting and precise figures. Which BU? Source for those numbers?

From where I sit, I see no coherent strategy at all. Due to the loss of skilled teams in this last RA move, we are paying over 37 million in penalties to drop 42 signed contracts (over 190 million in rev) that we no longer have the personnel to support. Thats a total loss of over 220 million to IBM. They could have paid the salaries of everyone let go all years for that with a tidy profit left over. Would that not have made more sense that to flush that amount down the drain? They could have always RA'ed the same people AFTER the contracts were fulfilled.

@1pk1 They maintain profitability to stay above water by cost cutting ,RA,ETC... They will continue to do so

What really bothers me is that IBM has been profitable this whole time. From a morality point of view, I don't understand how any company can cut workers while it is still making money. The expectation of increasing dividends and increasing profit percentage causes this insanity.

I know businesses are not charities, but it just seems very very wrong.

There is no doubt that at 350K, IBM still has too many employees. The number should be more around 250K. I think after this round of layoffs it will be half way there. The rest will come in 4Q.

You over shot the mark by 2x. IBM wants to be a 55-60 billion dollar company Last weeks RA’s did a lot to move it in that direction purely cost wise. There are still a couple of shoes to drop revenue/cost wise, and then they will be there. AK has till end of 2020 to get the ship righted. The revenue/cost part will soon come into focus

The company is executing a plan to become a $30B company ($20B mainframes + $10B RedHat). For a $30B company, it can't afford to have +300K employees (who are paid reasonably well, compared to majority of Walmart and Amazon employees). It's cruel to dump so many people during a pandemic. But the new CEO only has a short window to do this, and many of executives are selfish and clueless anyway. TL;DR, the ship is sunk, stop rationalizing.

Now IBM has a lean go to market machine focused around:
Cloud - IBM Cloud is a distant fourth in a three horse public cloud race. AWS and Azure are way, way ahead of the pack in market share and market perception. Google is the # 3 in mind share. How will IBM catch up when almost no one is talking about IBM Cloud as a potential preferred Cloud provider?
LINUX - RHEL is great but this will commoditize over time. Not a major source of revenue for a company the size of IBM.
AI - Watson is not big revenue now and AI field is now becoming filled with all sorts of capable startups and growth companies. Plus hyper-scalers have their own AI solutions.
Enterprise - Mainframe and software are low growth if that.
REDHAT - excellent company but how big can they get as competition from hyper-scalers, VMware and others heats up in K8 space.

IBM's move to specialize will be it's quicker decline. Is IBM's goal to become a small niche player? Wow, that would be a spectacular fall for this once dominant IT company.

All great companies need a flagship product line that they produce that defines their future. What will define IBM?

IBM has always been pitching teams against each other, be it lab services against GBS, SWG on prom against cloud offerings and Global Markets driving the flavour-of-the-day product based on the highest incentives that are usually not what the customer needs. Layoffs or not, while that pile of messy incentives persists, IBM will not get out of the whole it dug for itself.

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Did the RA’s change IBM’s course For moving forward

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