Thread regarding IBM layoffs

"The Rometty Years – How a Tech Icon Turned into Toxic Waste" ... An award winning Netflix docuseries.

Good points. I tend to agree - spinning off GTS to someone sounds good, until you realize there is no someone left to buy it. The only path forward for GTS I can see is more cuts - and massive ones until it becomes less of a burden than it is today. What that would look like when it's all said and done is probably not pretty though.

@4lpj I work in Services and you’re on track. Thing is, India pure play firms are moving away from legacy delivery contracts too as the clients are turning away. Many are increasing a local presence and hiring in western countries. We’ve lost a few leaders in my group to Wipro, took all their clients with them. Many of the India pure plays are also in our clients where we have GTS outsourcing contracts and they have seen how clients complain. Don’t know that any of them have the appetite to take on the burden of fixing GTS when it’s easier to hire and build your own team. I could see one of the Indian firms in decline being interested, maybe CGI or Cognizant. But don’t think either one has the cash to pay for the whole GTS and both have been burned by bad outsourcing contracts before. Think we’re stuck with GTS.

So valuing GTS for their existing contracts is how you have to look at it. Wipro, Tata, etc etc would buy the customer base (revenue stream) and existing backlog. NOTE IBM will not sell cloud. If we look at previous sales to other Indian companies they usually buy for approx 30-35 cents on the existing revenue stream. Does the backlog command something more. (don’t know) That means approx 7-8 billion based on 20 billion revenue stream. Remember IBM has an existing backlog of approx 100 billion so perhaps IBM can get a little more. Just reducing the headcount and burden rate should make the cfo smile. Throw in getting paid, and he will be quite happy

Layoffs are always across the board not to mention it allows IBM to avoid the WARN act. IBM needs to save as much as it can folks. REV is in a dive... another 2 billion not made this year... and I know what people are going to say, we sold this we sold that.... but didn't we buy Read Hat?!?

Accounting is pretty easy, it is: revenues (sales) - expenses (mostly employees) = profit

They have to find a buyer because that preserves their reputation. If it dies or is shuttered under IBM then IBM's other customers will take notice.

The question is, at how much of a loss will the sale be? Will they do it before the next recession?

I've seen the idea of a GTS spinoff a few times here. But, I just can't see how that will play out. Services isn't hardware. Lenovo was buying a product that they figured they could still sell to someone. Services is a bit different animal. Especially today.

What deep pockets buyer would want an antiquated monstrosity, such as IBM Services? I mean, look at EDS/Perot Systems, which HP swallowed up and then spit out a few years back. That business was wiped out. IBM with PwC - eviscerated. So many consulting, hosting, managed services companies, large and small have either gone away or are barely heard of anymore. I think even GTS swallowed up AT&T's services firm awhile back. And look how well that went.

The big players (MS, Google, AWS, Oracle etc). wouldn't want a boat anchor like GTS. In my mind, that leaves only the Indian outsource players, who do still play in this area - Tata, Wipro, InfoSys. These guys might pick this biz up for the customer list and the right price. But I'm sure the end result for the few IBMers picked up wouldn't be good. To put it mildly.

Am I way off track here?

“old pension goes away if you stay”

You forgot the asterisk.

“old pension goes away if you stay*”

• except for senior executives

The trimming of divisions always results in folks looking for an escape hatch. Services provided that when IBM trimmed Intel and HW division respectively I’m quite certain cloud will provide that excuse for the GTS/GBS/perform parts of Cognitive. The only way to stop the escape hatch is to make it hurt more to stay with IBM, and encourage jumping ship. IBM always just says everything is frozen, BUT there are always ways around that. A pile of folks I work with were informed that if they jumped to Lenovo, they would be offered a 1 year severance. Guess what That swelled the number of folks who went to Lenovo, and then Lenovo did offer the one year severance. The incentive was baked into the del, and IBM didn’t have to take the bad publicity. I suspect a similar deal will be baked with GTS, BUT IBM will have a slightly bigger carrot in that the possible “legacy” pension change may be the club. IBM will just announce they are exiting the legacy pension game for the remaining pension eligible folks and will say “old pension goes away if you stay”. Making the entry into GTS cloud quite specific will also stop a large portion of job shoppers.

Klo. You have hit the nail on the head. IBM always try’s to save too much with the part that they save withering on the vine over the next 18 months. There is a reason IBM wants to nuke the remaining pension folks, and its this lingering management team in services. They are a small percentage of the entire population, but they carry a very heavy burden. IBM kinda cut their teeth on dumping divisions via Intel servers to Lenovo. (they loaded up the bus). Perhaps they will do the same at GTS. I guess we’ll find out next week

Most of the major carve-outs that I've witnessed here at IBM have meant the rank and file are cut and the managers stay. Except in a few odd cases, I can barely remember anyone other than an individual performer being let go. From what I've heard about over in GTS, so many managers were saved in the past few years of cuts that there's not a whole lot of performers to choose from for the next go round. Maybe that will change this year.

The problem is that in any GTS carveout, they will try to save too much and by categorizing it into “Cloud.” Executives already know they need to do this in order to protect themselves. I fear that while a GTS sell off is necessary, not enough will be sold to make it worthwhile. Unless GTS goes wholesale, the problems and mismanagement will remain.

GTS would be my bet, too. Business is drying up quicker than management can rearrange the hollowed out groups on their sinking ship. Sooner or later, someone higher up will look at the numbers and realize there is no reason to keep many of these folks.

GTS seems to be reorging into Agile Squads for work which I bet = RA's very soon.
If you have no squad you might be in trouble.

Klo any idea who might be in the cross hairs. The CFO left little doubt that it’s all about margins and growing parts of the business. Some possibilities are

1. Low margin Perform parts of GTS. (the CFO made this point abundantly clear)
2. Commodity parts of Systems (Storage and certainly scale out power)
3. Old plan pension members (there are not very many of these, but they cost almost 2x vs new hires for their burden rate)
4. Aging out legacy SW (mostly point solutions)

Get ready for a big layoff... notice are going out the first week of February. Good luck all!

Exceeding expectations is meaningless. Expectations were 4Q would be very awful. Then we hear it was only awful, and IBM counts that as a win? Look at the market, look at the industry, see where IBM compares in real terms to its competitors. That will show you the truth.

Investors are in a state of desperation for any good news from IBM. Guess 0.1% is enough. It won't last. Once they start poking around and diving deeper, it will become clearer what the real picture is.

The numbers and creative accounting do not tell the real story, most of IBM lost real opportunities and the employees are being replaced with lower cost workers. Has nothing to do with reality. Unless IBM gets lucky with a few big billion dollar look for more drops.

How can you get excited about 0.1% growth when the economy overall is growing at nearly 3% and the rest of the tech sector is growing at >20%?