Since Krishna became CEO in late January, IBM has cut an unspecified yet seemingly large number
of jobs. In the first quarter, IBM took a $728 million charge for workforce rebalancing, according to
its most recent 10Q from late April. In the second quarter, IBM took another $140 million charge
for workforce rebalancing, but did not specify how many jobs were cut or moved to other
businesses as a result. An IBM spokesman said it announced structural actions during its earnings
call in January, to reposition its global services business, and that the charges in the first and
second quarter are part of that same announcement.
IBM ended 2019 with about 352,000 people, and yesterday said it would hire 1,000 paid interns
from inner-city schools, as part of a program to diversify its tech talent. But the spokesman
declined to say how many jobs IBM has cut, adding that IBM only reports its employee population
at the end of the year.
One Wall Street analyst wrote Tuesday that she believes the pandemic may be delaying even more
aggressive moves by Krishna, which she believes are necessary for a complete turnaround.
“Although IBM should fare relatively well through a recession, the pandemic will delay new-CEO
Krishna’s ability to take more aggressive strategic actions to turn around IBM’s business (e.g.,
divestitures, acquisitions, radical restructuring) — in our view, essential to the success of the
turnaround — and in the meantime, the company will continue its slow, difficult decline,” wrote
MoffettNathanson Research analyst Lisa Ellis, in a note. In an email, Ellis estimates IBM’s job cuts
in a range of 5,000 to 10,000, and said that she believes the new CEO needs to do more, such as
potentially splitting up services and/or legacy products, to focus on its higher growth
opportunities.
“We believe that IBM should consider — not saying it is the right answer, but should be seriously
evaluated — breaking up the company, splitting the services businesses apart from products;
potentially separating the growth products (like Red Hat) away from the legacy platforms that are
stable, but declining and can be run for cash,” Ellis said. “As a new CEO in a turnaround situation,
we believe Arvind should — and arguably has a fiduciary duty to — evaluate some more drastic
options.”
Undoubtedly, the worst is yet to come in 2020 and into 2021. And stick the fork in Services & legacy, they're done.
https://www.marketwatch.com/story/ibm-stock-gains-after-earnings-beat-but-the-really-important-stuff-could-be-doing-better-analyst-says-2020-07-21