Analysts Call IBM Layoff Estimates "Hogwash"

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."

They're probably right, but...

...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 because they don't really fit with their future plans, they could scrap those first. And then think of the places you've worked. How many people in those places were completely fucking useless and the company would go on without a hitch or even do BETTER with them gone?

Yeah.

Also IBM still has a lot of tech support in the US, if they outsourced most of that, then those people could find themselves without a job.

Does anyone know anything about an actual breakdown of where those 350,000 people who work for IBM in the US are actually placed? And I don't mean geographically, but by business unit (at least - type of job function would be better.) Not that I expect any such data - but then, the analysts don't have it either.

But who knows, maybe the estimate was just over by an order of magnitude - a misinterpreted misprint :)

That's not what they mean

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.

Not hogwash, not just the US

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.

Depends on how you define it...

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.

When have upper management decisions . . .

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.

The investors don't seem to have heard

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.

Never underestimate the lure of the dark side...

"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.

Re:Never underestimate the lure of the dark side..

>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.

Re:Lazy Americna perception...

Neither. Shouldn't it be obvious? American Express workers are definitely the hardest workers. They are (clearly) American, and the Express in the name, well, no need to say more...

Re:Never underestimate the lure of the dark side..

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.

Essentially stopping operations

There isn't anything to preclude a CEO from implementing cuts that essentially stop the operation of a company while it restructures. Sometimes they don't come out of restructuring. A few years ago Tellabs cut its operations so far down that it has never returned to being a competitor. This happens because a CEO wants to save his ass, and he stops operations and sells corporate property for short term financial stability. 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, although usually while under more duress than IBM is now.

Satirewire article:

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!

Cringely Little...

The sky is falling, the sky is falling! We must go & tell the CmdrTaco!

Cringley was the one to break this story

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

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.

Well, if you read Cringeley's comments section

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.

Layoffs are underway, but exact number not public

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.

Just another IT layoff

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.

Makes no sense. So?

analysts ... say this ... would make no sense

Since when has that stopped people from doing stupid things?

- RG>

Bait and Switch

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

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

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 us surely will be.

WRAL article

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."

I could see 50,000 of that 130,000 out the door

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 in the small to medium sized companies, most large companies have figured out they can go to India on their own they don't need to have IBM act as the middleman. Managed services are becoming cheaper and can be bought ala carte. Google hosted managed exchange servers or whitebox VOIP if you want a glimpse of what future managed services are going to look like.

Most of his rethoric is anxiety relief

This analysis is so patently stupid ... I'm afraid of infringing on that
guy's rights.

They're not cutting 43% of their workforce. They're sending those 43% to
China because that's where those jobs will be needed in the near future
to support all those other jobs that are sent there by the rest of the
F500 "economy".

The number are wrong but it's going to be harsh

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.

Compared to HP, Google

Facts:
HP has 156,000 employees, and about 90 billion in revenue.
IBM has 366,000 employees, and about 90 billion in revenue.
google has 11,000 employees, and about 12 billion in revenue.

I think that's where the 150K came from, the old $/employee ratio.

Layoff's don't make sense

IBM is a services company. Human capital is their advantage. Unless they are not making a profit do not expect layoffs en masse. trimming fat, maybe. 150K sounds like bullcrap.

Amusing

I work for IBM....I'm not doubting a Layoff, but not that big, but the funniest thing about this article is the so called "LEAN" program.. yeah I know all about the IBM LEAN project since I'm a part of that project... it's an efficiency program loosely based off Toyota's methodology. it's to make our manufacturing process quicker and more efficient. Anybody that works in my division would laugh at this article.

Competing with the Indian companies

IBM is now competing with the Likes of Tata (TCS), Wipro and Infosys. While these guys are producing 44% returns every quarter look at the results by IBM - 8 to 9% - even their India operations. No surprise that they want to become Indian Business Machines !! For folks who look at TCS marketcap know that they have only 13% of their equity in the public market - with the largest market cap (I know - can fluctuate). If IBM needs to compete with them in the future, they need to play the game similarly.

Re:what life would be like in an ATHEIST WORLD:

When can we expect this Utopia to occur? Right after the Rupture - when all the Christians go to hell because Jesus believes that "they all think like bugs down there"?

Re:what life would be like in an ATHEIST WORLD:

This is just weird. Where does it come from? Why is it that insane people like this poster has to spout this kind of nonsense in random places?

Nothing good ever came out of religion. The foundations on which the US was built are entirely secular in nature, even though the people who built those foundations had different views on religion and Christianity. They were all smart enough to understand that only a secular country will survive. Countries lead by religious maniacs will alway fare poorly. Look at the current state of the US. That is what happens when you let the Christian version of the Taliban rule the White House.

Oops-Was meant as a reply. No I am the fool.

Damn. Sorry all. I was responding with a flame to a stupid flame bait post and tripped on my own zipper.

Re:You know

nobody would here them scream.

That "here" there, that's neither here not there.

Re:hilarious

Actually, atheists "hate" ALL religions.
The agnostics, those are the "tolerant" ones.