
IBM To Furlough Most Of Its U.S. Hardware Staff In Late August - dmm
http://www.forbes.com/sites/alexkonrad/2013/08/05/report-ibm-to-furlough-most-of-its-u-s-hardware-staff-in-late-august/
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fiatmoney
Hardware has been a loss-leader for IBM consulting services for a long time.
Looking at the straight P & L for hardware alone doesn't make a whole lot of
sense.

The real story is that IBM has been moving to 100% offshore & H1B labor for a
while, and this is just one more nail in the coffin. In a decade or so I'd be
surprised if they have any US engineers outside of their research division.

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hvs
It would seem to me (i.e. someone who knows _none_ of the details of IBM's
internal business) that if IBM is so sure that its mainframes are so much
better than using "cloud" services, then they should be building a cloud
solution on those mainframes to compete with the Amazons, Microsofts, and
Googles of the world. It's really not that different from the lease model with
their mainframes (which they invented, I believe) and they would actually make
their systems somewhat relevant again.

But I'm sure that I just grossly oversimplified the problems that they are
facing.

~~~
snom380
For mainframe customers like banks, stock exchanges etc, running "in the
cloud" is just not an option due to availability and security, so pushing
mainframes as a cloud service doesn't make much sense.

~~~
iends
This is why IBM is betting on the private cloud.

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rayiner
So much for the shortage of qualified STEM people, huh, (at least if "STEM"
includes electrical engineers).

~~~
mathattack
Some companies hire, some fire. As long as the hiring exceeds, there can still
be a shortage. I know very few EEs that have trouble finding jobs.

~~~
vonmoltke
It took me over two years, and I ended up in a pure software engineering
position. I couldn't get anyone to even call be back over EE positions,
because everyone wants fairly narrow specialists for everything except entry
level, college hire positions.

~~~
mathattack
Interesting - perhaps because I see so many EEs in software or consulting I
don't think as much about hardware. I can see how the field can get
specialized very quickly, and the first post-college job is critical.

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dsr_
Cringely called this a few months ago:
[http://www.cringely.com/2013/06/20/ibm-to-customers-your-
han...](http://www.cringely.com/2013/06/20/ibm-to-customers-your-hand-is-
staining-my-window/)

~~~
Yhippa
Wow. I lost a half-hour going down the rabbit hole of the projects he
mentioned in that article. I know there are two sides to a story but when it
gets out into the news like that (especially the one involving the City of
Austin) that's real bad.

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mgaphysics
Maybe my glass is half-full, but furloughing everybody for one week may have
prevented them from cutting a number of individual positions completely. The
thing that I find interesting is the statement about efforts being made to
return the business model to sustainability: "new product launches,
investments, acquisitions, changes to its go-to-market, new client centers of
competency for Linux and flash memory".

Did I miss something or is this a list of things on any viable business model.
I would have liked to see them make "out of the box" moves, but alas, this is
the IBM we all know and love.

~~~
iends
IBM just have had a large series of layoffs. People have suggested IBM is
trying to get more employees to quit.

~~~
twistedpair
If you get them to leave, you don't have to pay severance. It's a typical
maneuver to shake the tree before the culling.

~~~
seanmcdirmid
Not to mention Google has a better office in the city, and hires a lot of the
high-end IBM talent fairly quickly as it becomes available.

~~~
wmf
In what city? Poughkeepsie? Rochester MN? Austin?

~~~
seanmcdirmid
"The City"

As in, much of IBM's operations are still in the NYC area.

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mathattack
Is this part of a larger issue of the company shrinking?
[http://www.forbes.com/sites/petercohan/2013/06/14/as-it-
shri...](http://www.forbes.com/sites/petercohan/2013/06/14/as-it-shrinks-in-a-
growing-market-does-ibm-have-a-strategy/)

My perception is they give a lot of money back to shareholders while milking
long standing businesses. I would think aggressive cost cutting is normal for
them.

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chflamplighter
Last month IBM jettisoned entire STG teams and with this mandatory furlough
one would assume others will decide to fly the coup. Couldn't blame them as
I'm seeing a seller's market for those with hardware engineering skills.

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jmsduran
Former IBM'er here. I worked in Power Software Development within STG, and was
laid off alongside 3,300 other US employees this past June. After first
quarter results became public, employee morale within STG pretty much sank.
Contractors were cut first, then a number of benefits were either reduced or
postponed till the end of the year. It became pretty obvious that some drastic
cuts were about to happen (now known internally as Project Mercury), but I
made the decision not to jump ship, hoping that my performance as a solid
contributor would see me through.

On June 12 I was laid off anyway, and while I was saddened to leave, part of
me was relieved to be moving on. Based off my first-hand knowledge, I can
attest that IBM is a huge company, and as such it's very easy to get lost in
the day-to-day grind and have your skills as a Software Engineer stagnate. The
company did not value employee creativity like I thought it would, and
internally teams are constantly absorbed in office/management politics, to the
point it ends up taking a negative toll on developer productivity. There were
many occasions where I wanted to move fast and resolve customer issues or
system bugs, but was slowed by the enormous overhead/red tape involved in
making even a simple change.

So if I could give one piece of advice to CEO Ginni Rometty it would be this:
Transform IBM into an organization that can move fast to benefit the customer.
I believe many of the struggles IBM is currently facing stem from an
organization structure that is slow and inefficient, part of which is due to
low employee morale (it's a little hard to focus on your work when you're
constantly fearing cuts/layoffs).

Fortunately for me I got back up on my feet pretty quickly, and landed a
better paying job that values employee creativity. I still keep up with IBM
news through the IBM Alliance, and feel for a number of IBM friends and former
STG colleagues who are most likely affected by this furlough.

~~~
johnward
I hope you had sometime in to get a decent severance. We were acquired by big
blue just a little over a year ago. I knew it would eventually come, but
finally some of our office got cut. One of my friend got 2 weeks pay as a
severance. I really don't see IBM ever being the type of company that can move
fast. The biggest change for us is that we literally can't help customers
anymore. We have to jump through hoops just to work with our own support team.
I just can't wrap my head around the level of red tape and BS policies in this
org.

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thereallurch
This furlough is an attempt to prevent another round of layoffs. Another round
of layoffs would cause IBM to reconsider which projects are necessary and
start eliminating projects as a whole.

30% pay for 1 week of a 52 week year works out to 0.5% of your salary. It
could be worse...

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forgotAgain
IBM's hardware division had a 35% profit on sales in the last quarter. In most
businesses that would be considered tremendous. Unfortunately for IBM
employees its not enough to drive up the stock price. That's the only decider.
That's what's driving the stock repurchases and the layoffs. Meet the EPS
goals set by management so they get their bonuses. Short term planning rules.

Mainframes are a growing business. They're failing with their Unix boxes, same
as Oracle. They can't compete with Linux. The other area where they are
failing is in sales of retail systems. E-commerce and iPads are killing their
intelligent cash register.

~~~
mrkodiak
IBM sold its retail systems business last year.

I left IBM STG middle of last year. In the span of about 6 months, half of my
former department either left IBM or transferred elsewhere in the company. In
the latest rounds of layoffs, I was surprised at how many good people (but
middle aged) in the larger organization were dumped, and how some bare some
areas have gotten (100,000's of code falls on 1 or 2 people).

~~~
forgotAgain
You're correct on the Retail Sales Systems. I misread their Q2 earnings report
at [http://www.ibm.com/investor/?lnk=fif-inve-
usen](http://www.ibm.com/investor/?lnk=fif-inve-usen) . The report, page 3,
talks of decline in sales excluding Retail Sales. I didn't take that to mean
they sold off RSS.

------
tryitnow
Not surprising. The company I used to work for bought tens of millions in HW
per year, much of it from IBM. However, the future plans are to move to
"cloud" solutions, which, of course, still require HW (difference being that
the cloud vendor will own it), but the utilization of cloud HW should be much,
much higher than our utilization rates, such that on net about half as much HW
would be required.

Of course, we were really, really awful at managing our HW capex, so that may
be an extreme example, but even if 25% less HW is required across many
industries that's a huge blow to revenues.

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chiph
IBM has forgotten that if they provide value to their customers, value to the
shareholders will follow.

~~~
iends
IBM has also forgotten that great companies are built by the people they
employee. Instead they are cutting benefits, hours, and are falling behind
other companies, all in an effort to chase shorterm shareholder value.

~~~
johnward
It really does seem that everything is related to short term profits for share
holders. Still chasing that $20 EPS even if it's not the right move for the
long term.

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johnward
I don't play the market, but one thing I don't understand is constant need for
"growth". I mean once you have one of the largest companies in the world how
much more can you really grow? What is so bad about being good at what you do
and making a decent profit. Why is there always so much emphasis on growth
strategies? I guess it's all because of wall street.

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fu9ar
Now they can all go hang out with the Googlers at Burning Man :)

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jgalt212
Is IBM stock a shorting opportunity here?

