IBM juices profits in Q2 despite sales drop Big Blue has once again demonstrated that it knows how to wring profits out of itself even as revenues across its many product lines have stalled in the wake, of or in anticipation of, product transitions. In the second quarter, which ended in June, IBM's sales were down 3.3 per cent, to $25.78bn, but intellectual property …
IBM is still playing accounting tricks through share buybacks as a way to prop up the earnings per share.
But here's the reality.
Global Services is down 6% in terms of backlog. That means that they are burning through their contracts and that they are not signing a lot of new contracts. According to GAAP, you recognize the consulting revenue as its burned, not what's in the contract. If this continues, you can watch margins drop.
In SWG, Information Management is down a point. Also not a good sign since they have a very wide and diverse portfolio. Big Data is eating away at their markets and the longer it takes IBM to figure out how to enter the Big Data game, the harder it is to stay competitive.
Workers are getting cut. The message is that they will be better off at other companies if they can find work outside of IBM. Talented staff will leave through attrition. If there's a reversal of fortune, you can bet IBM will look to locations where they have a lower cost per body, regardless of their skills.
Not a good thing and as this continues, you can see customers bailing as their contracts end.
If you want to know how IBM makes it's profits through a reducing revenue stream, it's simply cutting costs, and cutting costs involves the eventual bottom line, headcount cuts in major markets.
We've been told this week that IBM has "restructured" it payrise strategy, so now less people than ever get payrises. It's no longer based on your personal performance and company, it's performance and job role, if you're in the wrong job role, you don't get a bonus regardless of performance. But we were only told about this at the time payrises were due, no warning, nothing. Ultimately this will annoy people to leave the company.......oh yes, a reduction in headcount.
And to cap it all, this afternoon, an "urgent" note sent out to employees.....we need to get together an Employee Consultation Committee. So what's an ECC used for, you guessed it, for redundancies. This is another rush job, reactionary decision, because at this point in time they can't even say how many they are going to make redundant.............another reduction in headcount.
IBM UK has had redundancies last year, and the year before, so we're up to 3 in a row now. All since the 2015 Roadkill Roadmap started in 2010.
This is how IBM will make EPS of $20 by 2015, cut heads, bottom line. Good luck to IBM in being able to keep customers based on this strategy.
Hey, let's not forget "Operation Waltz" back in 2009, either. Several hundred of IBM UK's longest-serving, most experienced employees (of whom I was one) forced out of the company by closing the final salaries pension schemes with not even the pretence of an attempt to cushion the blow or compensate for the loss - if you want to keep your pension, work 6-7 more years to regain what you'll lose, or go now. All that against a background of (never acknowledged but known to all) annual quotas of staff separation via "Personal Improvement Plans" in which the company was judge and jury. Many, many of us decided we had no genuine choice, took our pensions and left. Precisely how many, was something the company wouldn't talk about; mid-2009 was, strangely enough, also notable for being the point at which IBM dropped any pretence at transparency, and decided to stop sharing its employee demographics with the world - so the numbers couldn't even be deduced that way. Honest estimates at the time, though, were that IBM UK shed 450+ of its most experienced people (more than 200 of whom felt sufficiently betrayed and misused by the shameful way they'd been treated to promptly file an action, still to be heard, for constructive dismissal and age discrimination).
Personally, it's hard to put into words just how relieved I now am to be out (especially when I meet and talk to people I know who are still working there). I have no idea how long IBM will be able to keep up the facade, before its customer base finally grows wise to just how far and how badly the company has actually corroded its skill base in the last decade (how little it actually now spends on training for its service people, for example). I'm almost amazed it's lasted as long as it has, even. Sadly, I suspect it's going to take a major, high profile customer disaster to finally wake people up.
Those of us who escaped the clutches of the Borg all have our own horror stories.
IBM is definitely in a downward spiral.
They will claim the need to reduce redundancies in the West, while creating jobs in the East (India) where they can get lower skilled and lower cost of service.
The point I was making was that their market share in key areas of technology are shrinking, while you and the AC were talking about the back end cuts to staffing.
Its all accounting smoke and mirrors where the senior executives no longer have the skills to innovate, and can only compete on price as their quality of service diminishes. Looking at their outsourcing brethren, they may not be as bad as CSC, but its still a race to the bottom.
Its a good thing you're out now. When the shit hits the fan for IBM, you will have established yourself in the community and may find opportunities with clients helping to clean up the mess that they (IBM) left.
Amen to the above.
I was wondering why HR had sent out an Email this week asking employees to urgently verify that their home address details were correct on IBM's records. Of course that request was dressed up as some kind of benign, touch feely action when it's probably so they know where to send the P45s.
Pirates be steering the ship me hearties....
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