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Analysts Call IBM Layoff Estimates "Hogwash"

Posted by ScuttleMonkey on Mon May 07, 2007 05:08 PM
from the only-time-will-tell dept.
IBM IT
jbrodkin writes "Rumors have been floating around saying IBM will cut 150,000 U.S. jobs, but a Network World story attempts to set the record straight by quoting analysts who say this news, if true, would wipe out the company's entire U.S. operations and would make no sense since IBM is actually doing pretty well."
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Related Stories

[+] IBM to Lay Off Half of Global Services Division 553 comments
Rolgar writes "Cringely says that IBM has begun massive layoffs in a quiet manner, starting with 1300 employees, but by the end of the year, the total will rise to at least 100,000 and probably closer to 150,000 employees, nearly 40% of their U.S. workforce. Some people will be temporarily retained as contractors at a fraction of their salary, and eventually, IBM will also dump many of the unprofitable customer contracts worked on by Global Services or outsource the work to Asia. If these people are looking for work, that could seriously drop wages for technical workers in the US since they will have to compete with these people for available jobs."
[+] IBM Says 'Couldn't Fire 150K US Workers If We Wanted To' 219 comments
theodp writes "In an e-mail worthy of the Dilbert Hall of Fame, IBM execs responded to Robert X. Cringely's Project LEAN layoff rumors, reassuring employees by pointing out that they've already wiped out too many U.S. jobs to be able to lay off another 150,000. Big Blue's employment peaked around 1985, when it had about 405,000 workers who were acclimated to a long tradition of lifetime employment. IBM puts its current global workforce at 355,766, with a 'regular U.S. population' of less than 130,000."
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Analysts Call IBM Layoff Estimates "Hogwash" 50 Comments More /

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  • ...they're just analysts. They don't actually know anything. They're making educated guesses at best.

    FTFA:

    Analyst Frank Dzubeck, president of Communications Network Architects, says the layoff rumor "sounds kind of ludicrous since there's only [about 350,000] people] in the entire company. That means they'd be wiping out every division in the United States including the headquarters, which doesn't seem plausible."

    why does it mean that? they probably have several divisions they could drop entirely becau

    • That's not what they mean (Score:5, Informative)

      by konekoniku (793686) on Monday May 07 2007, @05:18PM (#19028509)
      I believe what they're saying is there are only 350,000 people in IBM worldwide, and not much more than 150,000 in the US. Hence, wiping out 150,000 jobs in the US would effectively mean offshoring the entire company, including the headquarters division.

      • Well... (Score:3, Interesting)

        by DogDude (805747)
        Well, Haliburton is in the process of doing that for other reasons. It's apparently possible.
      • Yep. And that definitely won't happen. I know quite a few mid- to high-level IBM employees in the US who feel that their jobs (and even their divisions) are quite secure.
        • Yep. And that definitely won't happen. I know quite a few mid- to high-level IBM employees in the US who feel that their jobs (and even their divisions) are quite secure.

          Unless they're a 4th line or above, they're kidding themselves.

    • Yeah. Didn't GM do the exact same thing in the early 90s? Record profits. Massive layoffs.

    • Re: (Score:3, Insightful)

      by theNote (319197)
      IBM's silence on the issue is deafening.

    • Re: (Score:3, Informative)

      by terjeber (856226)

      Does anyone know anything about an actual breakdown of where those 350,000 people who work for IBM in the US are actually placed?

      Why is it that people have such a hard time reading simple words and numbers? IBM doesn't have 350,000 people in the US. IBM has about 330,000 people total, IN THE WORLD. IBM has some 130,000 or so people in the US. Total. Less than half of that is IGS. But just for fun, let's say half of IBM is in the US and half of IBM is IGS (that is not the case). We end up with IGS being a

      • Read TFA before you quote it.

        What? That's like saying "inhale before you exhale". Obviously I read it, but failed to properly comprehend what I was reading :P

        However, the reason I didn't comprehend it is two fold; I was in a hurry, and it was poorly written. There should be no need for the brackets in there, and TFA says nothing about how many employees they have in the USA, only that there are about 350K employees of IBM worldwide. For all I know, 250-300K of them are in the US (despite having worked for

  • Not hogwash, not just the US (Score:4, Informative)

    by Anonymous Coward on Monday May 07 2007, @05:14PM (#19028463)

    Our offices here in Winnipeg (Canada) are going to be decimated down to a skeleton staff of people to maintain our managed servers (for places like MTS, etc.) I've been hunting for another job for 2 weeks now, since a relative of mine high up at IBM told me about my office situation.

    • Re: (Score:3, Funny)

      by Anonymous Coward
      FYI: Posting as Anonymous Coward doesn't work when you give your employer enough information to identify you indirectly.
  • The question that comes to my mind is how are they defining "employee" for the 350,000 people in the company figure?

    Are they talking just full-time people or contractors? My guess is that they're only counting full-timers.

    If they include contractors in the number of people IBM employs, I have no problem believing this "hogwash" figure.
    • So what exactly is it about 'including contractors' that suddenly makes a layoff of 100-150,000 employees believable? If you only accept the 150,000 figure as full-time US employees...how many more contractors do you think IBM employees in the USA?

      Your hogwash reasoning goes well with Cringely's hogwash numbers.

      • Don't know about the numbers or how true all this is, but of the teams I know of (having worked there previously and we keep in touch), one team lost _all_ their contractors (5) and 1 regular. Another lost a regular that I know. A third team lost 15 of their 23 member team. The group I'm currently with lost 5 contractors (our team is mostly contractor; heck I think we have two regulars).

        I noticed the news article I saw locally said IBM was laying off 1,300 people, giving them 30 days to find new employment
    • I wrestled some hogs this past weekend (covered in crisco no less) and can tell you right now: anything designated to wash hogs should be a GOOD THING!

      Maybe I am not knowing the meaning of this "hogwash" word you are using...

      For those that are wondering, it was a hog wrestling contest at a men's gathering. And yes I did get a Tshirt for doing it! :)
  • Since when have the decisions of upper management or CEO's ever made sense to begin with?

    Maybe there was a time long ago, but recently the only way to make sense out of half of the actions we see out of big company CEO's is if there actions will somehow justify giving themselves another $10 Million or so in salary or other bonuses.

    • Re: (Score:3, Insightful)

      by fm6 (162816)
      Well, it's possible IBM's management is just acting retarded. And it's possible that Cringley is just full of shit. I know which theory I like...

    • Re: (Score:2, Funny)

      by maxume (22995)
      Just think, if IBM took $10 million and spread it among the 100,000 people they are supposedly laying off, they could pay them each $100. It would be like firing them, except they could buy some new pants.

  • The investors don't seem to have heard (Score:2, Interesting)

    by Anonymous Coward
    http://www.investorvillage.com/smbd.asp?mb=4326&pt =m [investorvillage.com]

    The IBM message board over at InvestorVillage seems to be ignoring this story ever since it broke last week. Usually the message boards are the first to jump on every unfounded rumor. It just seems that this story has zero credibility.

    I begin to wonder if it was made up by a guy called Darl.

  • "Rumors have been floating around saying IBM will cut 150,000 U.S. jobs, but a Network World story attempts to set the record straight by quoting analysts who say this news, if true, would wipe out the company's entire U.S. operations and would make no sense since IBM is actually doing pretty well."

    It's all about short-term stock price manipulation (which I call the "dark side" since it ultimately winds up being a loss but brings instant gratification).

    If the CEO is retiring soon, then he has little incentive to do right by the company in the long run, and plenty of incentive to play games to increase the stock price in the short term (so he can sell off his shares after the price goes up). A massive layoff like this would be entirely consistent with that scenario. And it's not like the company's "investors" would give a damn about the long-term outlook of the company anyway. After all, it's all about the growth rate of the stock, and fast growth for a short time is still fast growth that "investors" can take advantage of. They just have to dump the stock before it crashes.

    So not only is a massive layoff of this scale plausible, I think it's highly likely. It's just the ultimate manifestation of the short-term thinking that American "businessmen" are so infatuated with.

    About the only thing that might prevent it is a huge backlash against IBM by "investors", which is possible but doubtful IMO.

    • >If the CEO is retiring soon, then he has little incentive to do right by the company in the long
      >run

      The CEO in a corporation like IBM is never a dictator, never has sole authority on executive decisions, and is held accountable to a Board of Directors, all of whom also have a vested interest in the corporation (and contrary to popular belief, do generally consider performance beyond the next quarterly report.)

      A company with as diverse stakeholders and as much volume as IBM has, will have quite strict controls on governance and management.

      • The CEO in a corporation like IBM is never a dictator, never has sole authority on executive decisions, and is held accountable to a Board of Directors, all of whom also have a vested interest in the corporation (and contrary to popular belief, do generally consider performance beyond the next quarterly report.)

        A company with as diverse stakeholders and as much volume as IBM has, will have quite strict controls on governance and management.

        You clearly were not an Eisner-era Disney shareholder...

        • Re: (Score:3, Informative)

          by fishbowl (7759)
          >You clearly were not an Eisner-era Disney shareholder...

          I *wish*. OMFG are you serious?

          Category 1984 2004 Percent change
          Disney's Revenues $1.5 billion $30.8 billion +2,000
          Disney's Income $294 million $4.49 billion +1,600
          Disney's Tax-Free Cash Flow $100 million $2.9 billion +2,900
          Stock Price (adjusted for splits) $1.33 $28.40 +2,100
          Market Value $1.9 billion $57.4 billion +3,000

          Disney's Enterprise Value
          (market value plus debt minus cas

      • (and contrary to popular belief, do generally consider performance beyond the next quarterly report.)

        Godsdamn Communists!!

    • If the CEO is retiring soon, then he has little incentive to do right by the company in the long run, and plenty of incentive to play games to increase the stock price in the short term (so he can sell off his shares after the price goes up).

      Well, not entirely true. Manipulating it and dumping it right afterwards could lead you to be liable for insider-trading fraud. In fact, lately the SEC has been coming down quite hard on folks practicing securities fraud in any form.

      You're right about the investors bi

    • I think there is a growing perception of American workers as being lazy.

      Just prior to the DOT COM bust I would see a lot of Visa workers staying
      very late, and not particularly getting much done, but looking very industrious.

      On the other hand I saw a lot of Americans standing around and "chatting"
      about the latest TV shows, Sports, Church, family, etc etc.

      The management saw this and took it on face value, so when the layoffs
      came a lot of Americans were canned and only a few Visa workers.

      I "was" working at Cis

    • Re:Never underestimate the lure of the dark side.. (Score:5, Insightful)

      by terjeber (856226) on Monday May 07 2007, @06:37PM (#19029333)

      So not only is a massive layoff of this scale plausible, I think it's highly likely.

      IBM will lay off and hire people here and there always. Some times they will lay off or hire a lot of people. IBM has acquired a lot of companies the past couple of years, layoffs are inevitable. These numbers are insane though. Insane for a simple reason: IGS doesn't have 150,000 people in the US to lay off. IGS doesn't have 150,000 people in the US period. So, will IBM hire all of these people before they fire them?

      Cringely needs to lay off his mothers medication before he writes his nonsense.

    • Re: (Score:2, Interesting)

      by DustyDervish (1043314)
      According to Marketwatch last week, there are a few global US corporations with US operations that are bleeding money. They continue to make their quarterly numbers because operations outside of the US are doing really well. I would not be surprised if we see more than one company pull out from the US entirely. The whole ruckus over importing cheap labor can be bypassed if they just move the company right to where the cheap labor actually lives. When your transportation is Bombardier Learjets and Limos,

  • Satirewire article: (Score:3, Funny)

    by Glowing Fish (155236) on Monday May 07 2007, @05:38PM (#19028755) Homepage
    Who says that laying off all your employees is impossible?

    http://www.satirewire.com/news/att.shtml [satirewire.com]

    At first, I remembered this as being an onion article, but actually it wasn't. Although the onion did have:

    http://www.theonion.com/content/node/28984 [theonion.com]

    So there you go!
  • and we KNOW he has never been wrong before, he's almost as accurate as Dvorak!

  • Senate Bill to Triple H-1B's Next Year (Score:3, Informative)

    by rlp (11898) on Monday May 07 2007, @06:32PM (#19029289)
    Slightly OT: In Senate bill 1092 [loc.gov], Sen. Chuck Hagel wants to triple the number of H-1B's granted next year to 'help' the high-tech industry.
    • Hmm... you know he's trailing in the *primary* polls for re-election... i.e. he won't get reelected and he's probably lining up some big cushy "consultant" or "lobbyist" position for Microsoft.
  • there are plenty of IBM types weighing in that they can easily see this happening - some have already left or been informed they will be terminated - and they know the company is having serious trouble with its Global Services division.

    So I suspect it's all true - although the actual count of employees to be outsourced might be speculative at this point since it appears IBM is keeping that number close to its vest.

    • So I suspect it's all true - although the actual count of employees to be outsourced might be speculative at this point since it appears IBM is keeping that number close to its vest.

      Speculative? It's insane! There isn't 150,000 people in IGS to let go. Not even close. Will IBM hire an additional 100,000 people in IGS in the US so that they can let go this number of people?

  • Layoffs are underway, but exact number not public (Score:4, Informative)

    by christoofar (451967) on Monday May 07 2007, @06:47PM (#19029433)
    IBM has a program going evidenced at activities underway in its Boulder, Colorado location for its (botched) implementation of LEAN. (similar to LEAN manufacturing, reference wikipedia)

    However, IBM is using staff cutting and IBM India augmentation to achieve the efficiencies that are documented in LEAN-M, whereas IBM's implementation of LEAN is really just a pony show that is masquerading as an internal offshoring program.

    The number of decimated IGS units in total will probably be something closer to 30K-40K employees.

    For the record, IBM has also made a settlement in a class-action in respect to its Cash Balance pension changes which were instituted after Y2K. Many people at Alliance@IBM (the organization which is trying to unionize existing IBM employees) fear that IBM is trying to put the pension fund itself into default so that those obligations can be wiped off the balance sheet, which would also be an instant win on IBM's stock EPS.

    IBM is not only ditching employees, it is also ditching customers. IGS was known for signing a lot of non-profitable contracts in anticipation that future work would be coming from those same clients (in addition to ancillary project-related purchases by clients for things such as networking and hardware and all the labor that goes with that).

    That apparently didn't come to fruition. IBM will be giving some sad news in the next few years to come of its accounts as it lets those go, and those resources who were working on them.
  • I know this is an oversimplification, but isn't this just another IT layoff?
    From what I understand, the people being laid off don't actually "make" anything, they just support the stuff other people create. Doesn't that make them a potential target for any layoff or outsourcing venture? In that light, this doesn't sound so far fetched, at least not to me.

  • Bait and Switch (Score:5, Insightful)

    by benj_e (614605) <walt.eis@nOsPaM.gmail.com> on Monday May 07 2007, @07:17PM (#19029733) Journal
    When it's all said and done, they'll layoff several thousand, and everyone will say "whew, we dodged the bullet there" since it didn't turn out to be 150K.

    And IBM will look like the good guys, or at least not-so-bad guys.

  • IBM Employees and Contractors (Score:3, Informative)

    by Bigbutt (65939) on Monday May 07 2007, @07:51PM (#19030113) Homepage Journal
    Hey, it just says 150,000 IBM jobs. There are contractors that are part of that number. This article (http://www.wral.com/business/local_tech_wire/opin ion/blogpost/1374664/) says what I've been thinking. 1,315 IBM employees and an unknown number of contractors. Since contractors get 2 days notice, by the time the article came out in the paper, the contractors were already gone. Note it does say that employees got 30 days notice. Contractors don't get that, at least not in my experience.

    I know of 10 contractors that were let go and 2 regulars. I know of another team that lost 15 of their 23 member team but don't know the breakdown.

    [John]

  • Plausible (Score:2, Informative)

    by Anonymous Coward
    Disclosure, I do work for IBM

    The numbers are plausible, but not at the 150,000 mark being bandied about here today. Last week, the number being quoted was 100,000, and in the USA that would be feasible, especially given the plan would be to actually hire almost 1 for 1 outside of the US where labor is much cheaper for the same skillset.

    My department lost ~33% of it's staff last week, with more cuts coming in the next month. While I don't quite expect a full 100,000 Americans will be out of work, a lot of
  • For a more balanced article, see http://www.wral.com/business/local_tech_wire/news / story/1392364/ [wral.com]

    Lee Conrad, national coordinator for the Alliance which is based in New York, called Cringely's figure of 100,000 "over the top." However, Conrad stressed that major changes are in store for IBM's workforce. "But having said that," Conrad said in reference to his "over the top" comment, "there will be at least 12,000 layoffs this year."

  • 130,000 seems like a pretty big number, however I work for Ford we got rid of about 20,000 people over the last few months the projected final figure is going to be around 30,000 for lay-offs, buyouts and firings. My department went from eighteen people down to two; I 'm one of the lucky two to still have a job. IBM made a big push into managed services while it's still big business the market that IBM caters to ie large corporate business is getting smaller the real growth / money for managed services is
  • There are about 60,000 total GS ee's in the US. Total North American (CA/US/MX) staffing is about 3x that. The 12,000 number world wide is probably low by 50% and that total number will represent FT ee's only no yellow badges. EMEA always gets hammered worse than NA. AP is already so damn thin there's nothing left to hack. LA is also thin. So the brunt will be in NA and EMEA. My guess is 24,000 total. We've just had 5.5% in one week. This will probably continue at a pace of about 5%/month this year and 10%/month in 2008. This would put the total reduction of 24,000 to end by June 08. At the same time they can hire 24,000 new heads in India and South America and save themselves 80% of the headcount cost for those 24,000 relative to US costs.

    Yeah I think it will happen.

    • While ending US operations isn't going to happen, cutting it down to 50% would fit right in to what IT companies have done in the past,

      Not really. That deep cuts would seriously hurt IBM not only in the long run but also in the immediate short run. If IBM cut half its US staff the street would interpret that as a sign of severe problems at IBM, problems that IBM obviously have been hiding. This would trigger fears about inappropriate behavior, bad accounting, memories of Enron, and a massive sell-off woul

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