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back to article IBM prepared to break knuckles of low-income students

IBM takes no prisoners when collecting a debt, even when it's relatively small and the debtor is a low-income school district that is atoning for sins committed two decades earlier. That much can be divined from a Contra Costa Times story reporting that earlier this month Mark Loughridge, IBM's chief financial officer, refused …

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Not so fast ...

No offense, but anyone that's carefully observed the American public education scene will have noticed that first, there is zero correlation between the money school districts spend and the results they achieve. In fact, the super could easily have said we're going to have to forego painting all the gymnasiums and teacher's lounges for the next two years as blather about spending money that could pay 20 teacher's salaries. You will have noticed he didn't say they had planned to hire 20 teachers, only that discharging their obligation could pay twenty salaries. This is another way of saying, we'd rather spend that money on something else. Since money's fungible, there's no reason that their having to pay bills they incurred represents any hardship whatever. One must ask, why is this school district's failure to budget or spend properly the burden of IBM's stockholders? The second thing to consider is the quite obvious point that they knew 14 years ago they'd have to pony the dough up. Any intelligent budgeting would have started making allowance for this back then and this would have zero impact because they'd already have the money. In fact, they could have discharged their debt earlier instead of later.

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Overpaid teachers

If the 5m represents the salaries of 20 teachers then that would mean each teacher makes $250 000 USD. Either this district needs less expensive teachers or more math teachers.

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Anonymous Coward

Not Just Salary

The costs of an employee, regardless of what type, usually also involves additional expenses above and beyond just salary. Health coverage and retirement plans add to that, as the Contra Costa Times article cited points out.

As for math, if it is just this first payment they are remarking on, the figures come to a much more reasonable figure - 1.2m / 20 according to my calculations comes in closer to $60,000 in costs per year.

The Richmond/ West Contra Costa School District long ago gave up painting teachers lounges and gyms, buying most books and supplies for students, and nearly had to cancel art and music programs due to a lack of funding,

(Of course if you read the actual article, you'll notice it says 10 teacher salaries, but thats another math problem for another day.)

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Math teachers needed urgently

The payout is over a four year period. That works out to $62,500 per year per teacher, which is not an unreasonable salary, especially for living in the S.F. Bay Area.

However, budgeting (or at least planning) for this should have started 14 years ago, as mentioned above.

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Anonymous Coward

IBM is already being extremely generous

If the school district racked up a $6.2M debt in 1989 and Ibm dropped it $1.2M in 93, and agreed to wait 15 years for the payment (how much has inflation dropped the buying power of $5M since 1989? Hint: A lot.). I think IBM is being extraordinarily generous already.

IMHO IBM has bent over backwards to give them time for this debt.

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Don

And for what?

You can quibble about how much the equivalent hypothetical teachers make, but the big point is that most of the computers were never used. All the money is just down the drain.

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They were PS/2 Model 30s iirc

Which were pretty much overpriced and obsolete. I doubt they had anyone who knew anything about computers in on the decision making process. Possibly IBM sold them a bill of goods.

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Tim

They never planned to repay it anyway

If they had started putting back 323,000 per year back when they knew they had 15 years to pay it, they would have had the money. Obviously since they never budgeted for it, they had no intention of paying the bill. This is not IBMs problem, this is how badly American school systems are managed here. It makes you wonder when private schools do better with about 1/10 of what the public schools spend doesn't it?

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You buy it, you pay.

I agree, IBM has been generous with them on paying this debt off. With 5M worth less now than what it was back in 1989, dropping 1.2M off the original bill, and IBM has been losing the interest/investment potential that this debt could of produced since 1989.

IBM isn't responsible for what computers the school purchased or how they where used, only the price tags on those computers and delivering them. The school should of had someone with computer knowledge to suggest what ones to buy, and an individual should of been over seeing how the money for the school was being sold.

The PS/2 Model 30's where released in 1987 had a 8 MHz processor, by 1989 the new MACINTOSH SE 30 had just got a new 16 MHz processor in it . The cost of PS/2 Model 30's is hard to find, but MACINTOSH SE 30 was around $6,500. So depending on the number of computers purchased, which they so conveniently misplaced, the price could of been correct..

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Cynical PR job by school board

This behaviour from the school board is a desparate and disgusting attempt to shame one of their debtors into letting them out of their obligations. i.e. "look at the big company bullying the terribly poor school board, isn't that awful". Well, no, instead it just emphasises the poor management and business skills of the public sector.

I wonder if they had been threatening to do this, but IBM have stood their ground so they have now carried out the promise to go public. This could damage their reputation, but its not as if IBM are flogging home computers any more and the consumer will be driven away by this news. More likely some government/public sector buyers could be annoyed and have their prejudice over professional IT consultancy companies strengthened.

What annoys me is that they will probably still get some benefit from this - i.e. IBM will compromise and reduce the debt, or otherwise throw them some free equipment (though at least that might be tax deductible).

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Was this a renegade order ?

Other news reports suggest that the order was placed unilaterally by someone who was not in the position to make such a significant IT spending decision involving 'hundreds of computers'.

But on top of this, the school district was already heading to financial trouble. If the person making the order knew they couldn't pay, that's wrong for another reason entirely - not just poor judgement.

As another poster said, $5m will buy much less than it did 18 years ago. The question is 'could the school board or their funding bodies reasonably met the cost of paying this debt over the many years owed, or at least planned to pay it off now ?'

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Let's Stay Focused

It doesn't matter whather the computers purchased were state of the art or obsolete. It doesn't matter that the West County School District has absolutely no money. It doesn't matter how many salaries or supplies or cans of paint this money might take care of. And it doesn't matter whether former Superintendent of Schools Walter Marks rots in the lower depths of Hades for all of eternity.

What does matter is that a bona fide authorized representative of the District made a deal and his successors renegotiated the deal. The District is obligated to stand up and fulfill their obligations. If the District tries to weasel out of this deal--no matter how bad it may have been at the time--what kind of message will they be sending to the students in their care?

This is yet another bad decision made by a con man nearly twenty years ago. The children of West County were shortchanged by this dastardly person back then and now the children of these children will continue to pay the price.

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This is NOT IBM's fault

You can't order $5m worth of stuff and then refuse to pay for it, just because you are an impoverished school.

If you don't have the money, don't order!

Next they'll be refusing to pay their book suppliers.. "but we're really poor and haven't got the money. Surely you can just give it to us for free as a gesture of goodwill."

Stupid.

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Future deals

Couldn't agree more with most of the posts, they bought it, they pay for it. Unless they file for bankruptcy, otherwise what is the precedent set for the future? why would any large organisation trust any deal struck with the board - or any board for that matter? the moment the bill seems a bit large, cry poverty and bullying by the big bad business. It ends in higher prices for everyone else who responsibly pays up having to effectively insure these deals.

The board does have recourse to pursue those that made the deal on their behalf if they were negligent - and i can't imagine how they weren't...

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Ripping off the taxpayer

Given that it seems likely IBM sold the schools a load of bullshit at big prices absolutely defines the relationship profiteers have with the public sector. People like IBM are absolutely dependent on the public sector for their very existance and depend on extracting the maximum amount of money from the taxpayer they can. If you totalled up how many billions of dollars IBM has had from the public purse over the years in the forms of tax breaks, grants for land and capital purchases, government contracts, the value of employees educated at public expense it is an absolutely disgrace they are asking a bankrupt public body for money.

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Slight Fairness

In slight fairness to the school district the article does say that the purchase was made by an earlier school district that went bankrupt and that Contra Costa came later, acquiring the debt of the earlier district. I dont know all of the political back story behind that change over(was it purely a cosmetic name change or is CC truly utterly different everyone from the earlier group?). IBM does deserve to be paid for any purchases made but it does sound to me more like a situation where you inherit your fathers debt when he died rather than just trying to not pay your own bills.

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Anonymous Coward

Dependent?

"People like IBM are absolutely dependent on the public sector for their very existance..." Wha? Check their P&L statement-- public sector business, which is extremely hard to win and has a very low profit margin to boot, is barely a pimple on their balance sheet. In fact, they'd probably be better off without it, given the overhead and effort it takes to get it.

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Anonymous Coward

All computers were obsolete when they were delivered

In the early 1990's computers were always overpriced and obsolete when they were delivered, it was a given. In those days computers were constantly being improved and brand new models could be obsoleted or overpriced in a matter of weeks.

The fact that the computers were not taken out of their boxes or used was not the fault of IBM (there is no mention of a breached installation contract).

I am a bit confused concerning the bankruptcy and the "new" school district assuming the debt incurred by the "old" school district. It seems that nobody contested the financial arrangements at the time when the "new" district restructured the payments to IBM. The current "new" school district has an obligation to pay IBM for the computers. The district should have budgeted and banked the money for these long deferred payments.

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Hmm

Of course its bad and I hope that whoever is responsible for this epic management screw-up gets what they deserve, (dismissal). However, this isn't really going to affect them sat in their offices somewhere. This is going to affect the good teachers trying to do their job and live a decent life, and more importantly the pupils themselves.

Whoever said $5m wont make a difference to their teaching - you were wrong.

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Re: Ripping off the taxpayer

Quote: "...it's an absolutely [sic] disgrace they are asking a bankrupt public body for money."

GET REAL: this was a business transaction, where both parties signed on the dotted line. The school district was low on money which obviously didn't stop them spending it, which in turn is how they ended up bankrupt.

IBM provided a service and a product, and has a right to be paid for that. The customer was, as always, free to choose which supplier offered the best value for money.

I strongly suggest you do some research, study Business 101 or something and come back when you've got a clue.

Oh and by the way, this poor defenceless little school district has had nearly 18 years to work out a repayment schedule for the (already reduced) amount they owed. Instead they chose to start begging to be let off at the last minute, and attempting blackmail by roping in some bad press for IBM in the event they didn't get their way. If ever there was a case of chronic financial mismanagement combined with abject panhandling PR golddiggery, this is it. Hope IBM gets it's money before these jokers mismanage themselves back into bankruptcy again.

</rant>

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Bono call your office

If this was a small country instead of a California school district, we'd be having benefit concerts and international cries for relief. But in both instances the problem is the same on two levels: the wrong people are being hurt by stupid expenditures made at the top and the 'moral hazard' of offering relief is that you set an example for everyone else that bills don't have to paid.

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