Feast your eyes!
https://www.ibm.com/annualreport/
12 replies (most recent on top)
Since Jim Whitehurst came from BCG, he will be leaning on their transformation framework (BCG TURN) that takes ~24 months to realize full value.
There is an interesting image halfway down this website that describes the phases: https://www.bcg.com/en-ca/capabilities/business-transformation/business-turnaround
Should be an interesting ride...
“They have chopped thousands of employees, YET their costs per quarter continue to rise.”
They’ve also hire thousands. Look at the official number of employees from year to year. Weak argument .
GTS’s problem reflects IBM’s problem They can’t lower costs. Look at IBM over the past 4 years. They have chopped thousands of employees, YET their costs per quarter continue to rise. THAT my friends is a serious problem. GTS’s problems are compounded by their business model vs the competition and the high overhead of IBM. Profit margins tend to run at 30% in body shops, and IBM’s overhead tends to run at 30%. That nets to a zero profit margin for GTS. OR in Ginni’s words empty calories. Better to spin them off where they can finally cut costs and drive Newco to a bottom line profit. Please note Until Newco gets out from under IBM’s current management, costs will not go down. Compare IBM’s cost of running the company over the past 4 years. There has been zero progress in getting costs under control (just look at the quarterly reports) . Keeping a CFO who can’t cut costs is shameful. It’s time to swing the ax in the executive ranks because they are not hearing or executing the message.
Nope, blaming GTS is spot on. They may bring in some cloud (mostly driven by GBS), but their contracts are mostly in the red from overruns in costs and underruns in delivery. This is the reason most contracts cancel. Why in the hell do you think IBM separating from that boat anchor.
Psst...a little secret. No one likes GTS, not even the clients. Good luck at Tata.
Blaming just GTS is wrong. Most of the supposedly “cloud” revenue comes from GTS. Quoting the Matrix: the reality is that there’s no spoon (cloud).
"... Going to 150-170k means that it has a long way to go... 90K go to NewCo... that would mean another 85-105K layoffs ..."
Yes exactly. This has been noted several times. It's gonna happen. Just waiting for the axe to fall. Suspect after NewCo spinoff starts mid-year.
That’s sounds about right 80k Remember IBM has already announced 4 billion this year, with another 1 billion next. Add in the folks who still have to exit from last year, and you are close if IBM is getting a 12.5k heads per billion yield. Then factor in selling off Power, Storage, Watson health, and the channel and you have another 10-15k worth of heads. Boom you are there.
Now if IBM really wants to play hardball just end the old defined pension plan by saying either exit and draw, or stay and take the cash payout. That should yield 20-30k worth of heads Yes it would be messy, BUT this is survival
The annual report states that IBM had 345'900 on December 31... Going to 150-170k means that it has a long way to go... 90K go to NewCo... that would mean another 85-105K layoffs!!!
IBM’s major decline in revenue is by far and away due to GTS. Spinning it off should stem a lot of the bleeding. Not exclusively, but a very large chunk of it. The resulting IBM after the spinoff should result in a more efficient IBM. Most companies measure efficiency via revenue per employee. Currently IBM is not very efficient vs it’s competitors. After the spinoff, IBM says they will have approx 54 billion in revenue. Given that they have under estimated the revenue fall of GBS, and the revenue fall of TPP during the Covid pandemic, I believe they are way too optimistic. Even if both of those sectors improve after Covid, they are not coming back to where they were. IBM will also have to shed some parts of systems as they are hemorrhaging money. Given a fairly conservative approach to post Covid IBM, we can estimate their revenue at approx 45-48 billion. If we factor an industry average of 300-325k per employee (industry average), that results in a Hybrid IBM being 150-170k heads. That means a whole lot of shrinking is about to take place. IBM took 2 billion in charges in 4th Q, but a majority of those folks have not exited yet (most due to work rules). Add on the 4 billion already announced in 2021 (4th q earnings call), and you can see what’s coming. The resulting IBM is going to be much smaller
Historical Context:
For the year ended December 31: Revenue$
2011 $106.9B
it's best to scroll all the way to the bottom, download the PDF, and look at pg 16. i.e:
For the year ended December 31: Revenue$
2019 $77,147B
2020 $73,620B (Decline of 4.6%)
Wow. 4% decline in revenue isn't good at all. Thank you, Ginni and GTS. RAs, here they come.
Also, IBM is in a huge hole with its dividend situation. They know the first day they don't give out dividends, will the day IBM stocks will tank. They're damned for paying out billions in dividends and damned if they don't.