Thread regarding IBM layoffs

GTS will have to dump (sublet) the centers all over the place if they are serious about cleaning up.

Why does anyone think the next CEO will be the saviour for all IBM's problems? The next CEO will be selected by the same people who have let Ginni destroy the company with no consequence.

GTS will have to cut their management ranks and the huge India delivery teams. There really is nobody else left.

If I were in GTS right now with a mortgage and a family to feed, I would make sure my resume was updated.

Sounds like the end is near for GTS -

"We’ll drive productivity and take structural actions, especially in our GTS business. In GTS, we are going to take aggressive structural actions to reposition the business overall. I would tell you, if you look at the last few years, that will probably be on the high-end of that. “

"..but very important to note, is I talked about we will be taking structural actions to reposition our GTS business from a cost competitiveness perspective in light of what we're seeing in the marketplace. And unlike last year where we had a funding event with regards to a gain that offset a charge, this year we're taking a charge and we're going to absorb that through the return of that. So, we really don't see a benefit overall, as we go forward.”

What is he talking about wrt a "funding event"?

Yes they are going to clean up services! It needs to happen That’s where the heads are, and that’s where the savings are. NOTE they said the clean up is towards the high end of what happened over the last 3-4 years combined. That’s a pile of heads. ALSO you said Z, P, and storage stay via the cloud. That is true, but all three of those are run via a skeleton crew now unless you are a fortune 1000 customer. Ask any scale out customer when was the last time they saw an IBM’er Their answer will be IBM’er? Also note, that cloud requires very few heads vs on prem. My speculation is IBM India takes the majority of the restructuring as they are the body shop piece. USA/Europe cloud GTS remains, but everything else goes, including redundant management and perform head count. This is Ginni’s swan song. She is leaving on a high note saying “I fixed IBM” Adieu Ginni adieu

Don't forget IBM filed over 9000 patents in 2019 :) Shame they can't convert them into effective products to sell! I laugh when I see IBM employees on other websites boasting about this number - oh, and their badges!

So they are going to clean up services, but with their hybrid cloud statements, it would appear they are keeping systems - Z, P, storage. Perhaps some services folk can migrate over to the legacy/systems side, but Systems numbers haven't been stellar over recent years either. Let's see how long bandaids can keep the ship afloat.

So listen to the analyst call given yesterday by the CFO. There are a couple of very very telling statements that show where IBM is heading. PLEASE NOTE every single question by the analysts centered around services to some extent. (Eg they know services is the weak sister and they want change). The CFO acknowledged this and said change is coming BIG time in the first half. Here are a couple of out takes

1. The CFO implied that the GBS go to market solution was correct and they will invest even more strongly in that, with GTS filling in the back end of the value statement (Eg servicing the cloud offerings). If you are in GTS and don’t have cloud responsibilities, I speculate you are part of the restructuring, and will be impacted.

“ We are investing in joint services offerings across GBS and GTS, and deploying joint go-to-market capability, as clients look for solutions across applications and infrastructure. We are expanding our cloud data center footprint, and we are taking structural actions to improve our cost competitiveness, while deploying a more asset-based delivery model.”

The CFO quantified the restructuring and tried to avoid the exact charges as much as possible

“Within that, we’ll maintain a high level of investment, focused on hybrid cloud and data and AI capabilities. We’ll drive productivity and take structural actions, especially in our GTS business.”

“In GTS, we are going to take aggressive structural actions to reposition the business overall. I would tell you, if you look at the last few years, that will probably be on the high-end of that. “

“I think what you're seeing is the natural early innings of that playing out, and that is represented more so in project-based businesses around cloud advisory, cloud application, migration, and advisory services. So, consulting is leading the way, but to me, that's the tip of the arrow that's going to lead then AMS, and then eventually as that matures, our GTS managed services going forward.“

“That does include discretes as we're trying to give you increased transparency and what's in our expectation, but very important to note, is I talked about we will be taking structural actions to reposition our GTS business from a cost competitiveness perspective in light of what we're seeing in the marketplace. And unlike last year where we had a funding event with regards to a gain that offset a charge, this year we're taking a charge and we're going to absorb that through the return of that. So, we really don't see a benefit overall, as we go forward.”

“We are going to reposition this business for hybrid cloud investing jointly, integrating GTS and GBS offerings around advise, build, move and manage, we are creating a building skills and investing, and where we see the growth right in front of us, that's starting to scale around cybersecurity management, trust and compliance services, multi-cloud management, and of course managed services around OpenShift.”

“And second, we are going to integrate our go-to-market with GBS and our global account teams at the large enterprise level. We're going to take these integrated offerings, leverage now the integrated value and breadth of IBM that can play across the continuum as clients move to journey to the cloud. And we're going to go drive that hard. And in addition, I would tell you, we are going to improve the cost competitive structure of this business with the actions we're going to take here early in 2020.”

We're growing operating EPS year-over-year. When you look at that tax rate – and I'm not going to talk to what each of you have in your own model, but underneath that we, as we said, are going to take structural actions to reposition our GTS business for the hybrid cloud world.

“Those structural actions are going to flow through to profit. And when I said those structural actions upfront, I said, if you look at the last few years, we are going to be at the high-end of that range, of that total charge. There is no coverage for that charge. We are going to absorb the return in our fiscal 2020 and still grow operating earnings per share to at least $13.35 coming off of what we just finished at $12.81. So, that's the first question.”

Is it bad that I root for bad numbers, because we know that the only way to get change is for the numbers to s—? We all know the Herculean effort put forth to get the numbers up at year end- close deals at any cost, etc. We have an empty pipe in my section of Services- ironically in Cloud which they say is so strategic. IBM has bought their revenue at a higher cost than it would have been to simply restructure.

1hvs. IBM will structure the deal just like they did for Intel server. They stuffed the selloff, and Lenovo paid folks to leave.

What would a GTS spinoff look like? Is there a market for that bloated and out of date service offering they have? If they had to survive on their own, with the uncountable layers of management and legions of people doing nothing, how long would that last?

I think pretty much everyone in the tech industry knows IBM Services is a relic of the past that belongs in a tech graveyard somewhere.

So just off of the analyst meeting. There were several key points made

1. CFO made no bones about it. GTS will be restructured and the size of it is “toward the high side of what we spent over the last several years”. Get ready GTS it’s coming
2. IBM will continue to invest in cloud and pick up the pace of spending there, YET will commit to increases in revenue and profit.
3. This came from CNBC and not the CFO, but all 5 analysts were impressed with IBM’s 4th q and all said it was time for Ginni to go. They expected a low margin/high margin break up like PayPal

Let’s see. CEO RedHat that made silk out of “free” SW, COO Delta during their bankruptcy and restructuring, consultant Boston group, and MBA from Harvard. Looks pretty good to me if you are trying to restructure and save IBM. Of course you could just go with Ginni as she has a stellar record to date

"Whitehurst is no Nadella nor is he a Kurian. He’s a financial guy"

So the perfect fit for IBM CEO.

Let’s be clear, Whitehurst is no Nadella nor is he a Kurian. He’s a financial guy who has run a company which relies on a heavy base of OS support contracts to survive. Easy to manage a business like that for profit.

NOTE IBM did not buy Redhat for the “cloud”, but rather to move the company in a new direction strategy wise. Ginni is toast (idea wise, age wise, strategy wise, and favor ability wise as far as Wall Street is concerned). Making Jim the CEO can’t hurt as he knows how to run Redhat, and he has a pile of “hanger on’ s” Exec wise to run the legacy company. He will have to decide if he wants to have GTS body shop services be part of that move forward along with Cognitive transaction processing platforms. Both of those groups have been shrinking in the 4-7% range and are a very large part of the Legacy bleed. The cloud body shop services will survive. Dumping GTS body shop, and TPP will result in giving up approx 20 billion a year in low margin revenue, BUT will leave a growth company that should command a multiples expansion. It would set the remaining company up to be acquired If that is the ultimate goal

"Whitehurst could provide IBM a much needed new perspective. But Ellis also thinks that he would be on a "relatively short leash" and would have to "announce something pretty significant very quickly.""

""The reason that IBM comes up on activist screens is because everyone sees what Nadella did and what the new guy has done at Google Cloud. Everyone is in love with Kurian," Ellis said. "Why can't IBM do that?""

IBM won't accomplish the sort of turnaround MS did by keeping the new CEO "on a short leash" and continuing to let the accountants run the company. You can't transform IBM by continuing to focus on financial engineering, cost cutting, and buying revenue. The culture has to change, management needs to put down the spreadsheets and focus on GROWTH, even if it means a couple of steps backwards short term.

"Why can't IBM do that?" - There are 34B reasons, where do we start?

As far as Whitehurst to be next in line, that will be the blind leading the blind. Let's face it RHT is not a cloud company.