Thread regarding IBM layoffs

The people left are burned out , they just sticking around to collect a pay check only waiting to be called in a hear the woods “ it’s your last day “. It’s over due folks , end of June .

Microsoft cloud growing like crazy and their stock is up. Something like 73% or 41% cloud growth - both numbers were tossed around but not clear what they referred to.

Even SAP cloud is growing like crazy.

Amazon reports earnings tomorrow.

IBM is falling further and further behind into irrelevancy.

-1qzm they can't get rid of the severance, tiny as it is. That is the only thing IBM can hold over your head to force you to train your replacement.

The real question is what can IBM afford to dump revenue wise. IBM has become hyper sensitive to any drop in revenue and has managed it’s restructuring around it. If you downsize GTS by 1/3 can IBM absorb the drop of 8 billion. The same will be said for storage (another 1-1.5 billion). Redhat will bring approx 3 billion, and selling of low margin GTS may bring another 3 billion in OTC revenue. (storage maybe 500 million). So will IBM be willing to shrink to 70-72 billion if it was able to pocket 3-3.5 billion in OTC. I suspect if it raises the margins of the divisions via reducing headcount and overhead, they will cut that deal.

Hopefully GTS is sold off and we won't have the internal IBM bloat BS to deal with anymore.

Either way, IBM is not a company one could retire from anymore so no tears will be shed.

Another 20,000 to 25,000 heads to roll . About the same number of the last big layoffs.

Don’t forget they are divesting all that software to HCL on June 30. And the rest of the marketing software in same timeframe to an engineered thru Bain & private equity “new company start up”. All those folks will be off the books in q3.

1ovg. I absolutely agree with you that 500 million will be spent in 2nd q for downsizing. The CFO said that. My guess approx 5% head count reduction worldwide. The operative questions for the GTS go forward strategy for the CFO came from Jim Schneider when it came to GTS. Answer was “we are managing this business for Margin profit and cash”. Last paragraph of Jim’s response on page 12. The follow up question came from Tien-Tsin Huang on page 13. He asked yet again a tough question on GTS and the CFO’s response was. Mainframe makes up 60% of the GTS content (I’m paraphrasing) with a high investment of IBM SW. IBM is selective in it’s investment prioritization and we intend to continue to invest in that prioritization. We do this because we choose where and how we are going to win. I read that to say 60% of GTS is mainframe and IBM wants it. I infer that 40% of GTS is non-mainframe and if it’s low margin, IBM will discard it. Again I believe we are both reading it correctly with you focusing on 2nd Q and me focusing on GTS which is a longer term transition. Either way, Kavanaugh has shown us the path he is on

Anyone hearing no one month salary if layoffs begin ? IBM needs cash foo Redhat and doesn’t have the cash . Also , you will be asked to leave the day you get the word , no 3 months hanging around, your out .

People 50 and older are also being looked at , lots of savings.

@1vck: Here's the link to transcript along with the excerpted relevant paragraph --

https://seekingalpha.com/article/4254826-international-business-machines-corporation-ibm-q1-2019-results-earnings-call-transcript

Regarding currency, while a stronger dollar hurts the top line, it generally helps expense due both to

translation and the benefit of hedging contracts. In the first quarter, currency helped our year-to-year

expense by nearly 6 points. Much of this was reflected in other income and expense. In fact, the $200

million year-to-year change in other income and expense was entirely due to hedging benefits.

Remember, these hedging gains mitigate the currency impacts throughout the P&L. Expense also

includes the year-to-year reduction of over $500 million for workforce rebalancing, driven by last year's

charge.

1vck. I believe they said “current” divestitures Kavanaugh danced around the constant question of what markets is IBM choosing to serve. He absolutely did say IBM would continue to re-evaluate the current Services portfolio and trim where necessary. He had one big tell and that was when pressed he said IBM was divesting of OEM market places. (NOTE he didn’t say where, but softlayer, low margin / bodyshop outsourcing, TSS jump to mind). I still believe IBM will have to transition storage HW to an IP structure and let the labs charge for any innovation that they come up with just like the GF deal. Otherwise there are just too many players who will do it for a penny less. IBM cloud will fill the HW sales vacuum

There was a comment on the call indicating restructuring and workforce balancing charges of up to 500m. That's a lot of heads to whack. They also indicated that divestitures would largely be complete by the end of 2q.

New head of sales in North America today too.

IBM is always behind in products , they try and buy their way into growing companies but we see this failing over and over . Other companies make their products and don’t have to do this thus leading instead of being behind.

Guess what’s coming next.......

So the analysts briefing (available on the stock holders relation page) was interesting. IBM has rearranged the 4 divisions to cater to Cloud. Cognitive expands, GBS stays approx the same with some slight modification, GTS downsizes, and Systems stays approx the same. The CFO did expand on that, and I would net it out as follows IBM is happy with Cognitive, and GBS. They are growing and have expanded their margins. GTS continues to disappoint and IBM will continue to downsize the less profitable portions of it. ONE major note here was IBM will not dump the mainframe component of GTS (no matter where it resides or what it does), but will de-emphasize OEM content/contracts, etc etc. My speculation is that IBM is not done here, and will exit approx 35-40% of the GTS business over time. Think about it this way. If you deal in OEM GTS contracts, you most likely will get spun off. The CFO was quizzed on this by several analysts and danced around the answer, but you could certainly by the end of the hour see GTS is in for more restructuring. Systems was thrown to the “nature” of the business cycle, and they expect 1-2 more tough quarters. The CFO did specifically mention his disappointment in storage (everything except flash) and said they are addressing it. One last systems mention was Power. While growth was acceptable (high end systems and low end LINUX systems), the mid-range Power HW disappointed

Systems is constantly the biggest loser - why doesn’t anyone mention that being sold ?

GBS solid enough to sell off. Say goodbye.

GTS not so much, nobody interested in a losing horse.

GTS is hosed. We knew this. GBS solid.

Lowest revenue in 17 years

So 2/3 of revenue is from gts and gbs. We can stop the speculation they will be sold - just too big.

As for the rest, when you stop building interesting things tha customers want, they stop buying. What a surprise.

The equation has always been revenue and headcount go hand in hand. If revenue goes down by 3% then head count goes down 3%. This is how most technology companies manage the business. Whether you use CC revenue or “actual” revenue is up to you. So now just pick out the weak sisters

Cognitive = -2% revenue growth +2 in CC

GBS = Flat revenue +4 in CC

GTS = -7% revenue growth -3 in CC. NOTE IBM changed the name from TS&C to GTS

Servers = -11 revenue growth -9 in CC

So who are the weak sisters.

GTS jumps out on both sides of the house (infrastructure and cloud, along with TSS)

Systems also jumps out, BUT Z is always seasonal. Storage is looking quite poor

The CFO i’m Sure will address this in the analyst’s briefing

That's the IBM I know and love ... not.

Can you guess what's coming next?

"(Reuters) - International Business Machines Corp reported a bigger-than-expected drop in quarterly revenue on Tuesday, an indication that its efforts to pivot to newer businesses such as cloud, analytics, software and services remained patchy at best."

The value of the divisions they have to sell off to pay for Red Hat just went down.

The only IBM way out of this is more cost cutting!