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Tue March 4, 2014
IBM Slashes Jobs
Originally published on Tue March 4, 2014 4:49 pm
IBM was once one of the country’s largest employers. Considered a major innovator in the high tech world, IBM was also a place where workers could count on having a job throughout their entire career.
But IBM is now going through a major restructuring after sustaining years of losses. These changes could result in some 13,000 layoffs, both in the U.S. and abroad. Some of these layoffs have already started, but the company will not confirm any numbers.
IBM declined to be interviewed, but sent Here & Now the following statement:
As reported in our recent earnings briefing, IBM continues to rebalance its workforce to meet the changing requirements of its clients, and to pioneer new, high value segments of the IT industry. To that end, IBM is positioning itself to lead in areas such as Cloud, Analytics and Cognitive Computing and investing in these priority areas. For example, already this year we have committed $1 billion to our new Watson unit and $1.2 billion to expand our Cloud footprint around the world. In addition, just this week IBM announced a $1 billion investment in platform-as-a-service Cloud capabilities, as well as investments in areas such as nanotechnology which will bring hundreds of new jobs to New York State. This also creates new job opportunities at IBM. At any given time, IBM has more than 3,000 job openings in these and other growth areas in the US.
IBM’s total workforce has remained stable over the past three years, and IBM now employs more than 400,000 people worldwide.
ROBIN YOUNG, HOST:
It's HERE AND NOW.
IBM Big Blue was once one of the country's largest employers, a major innovator in a high-tech world, a place where workers could count on a job for life. Then IBM missed the first wave of the PC revolution later. It was late in investing in cloud computing. It's now going through a $1 billion restructuring after years of losses. And workers say IBM is laying off workers to meet an impossible to meet pledge to Wall Street.
The Guardian's U.S. economics editor Heidi Moore has been writing about this. She joins us from the NPR studios in New York. Heidi, welcome.
HEIDI MOORE: Thank you. It's good to be here.
YOUNG: And we - let's just say, we contacted IBM. They declined to speak with us today. But they sent a statement. We'll post it in full at hereandnow.org. They say they're actually expanding. So weigh in for us. What is this pledge that IBM made to shareholders in 2010?
MOORE: Sure. They promised that they would get up to $20 earnings per share by 2015. They call it the 2015 roadmap. Right now, their earnings per share is about $14, and they've been working on getting it that far for four years. So in the next year, they have to get from $14 to $20 earnings per share. And it's a tall order because IBM sales have been slumping for six straight quarters, and their growth has been slowing as a company. And they're not doing that well in hardware, which was traditionally their strength - things like computers and all of that.
So right now, they have this almost impossible-to-meet goal that they've committed to Wall Street. Wall Street doesn't quite believe it's going to happen judging by how much IBM stock price has fallen. And so that's resulted in some really deep cuts, not just in the U.S., but also globally, in Asia, in Africa and in India, where IBM expected to expand.
YOUNG: Well, so employees are calling this a deal with the devil. It sounds like you agree with what they're saying that IBM is now laying off workers to try to meet that share price.
MOORE: Yeah. Well, I think that, you know, I mean, staying away from sort of the moral judgment of it, of course, employees are furious, and have been for a long time, because IBM was almost a motherly company. It was a place where you used to stay for 20, 30 years. And for employees to be tossed out is incredibly traumatic for them.
But also, for IBM, I would say that the plan is, you know, empirically, you can just say it's incredibly overambitious. It would take a great deal for them to meet this target. But, you know, similarly, for them to say that they can't meet the target is going to end up in some pretty painful punishment from Wall Street. So it's kind of a little - a shadow area of delusion right now.
YOUNG: Well, you say IBM has gotten themselves on a hook they can't get off of. Again, we had a statement from IBM. They say they're expanding. And we read that in upstate New York where whole towns like Endicott - you write about Endicott - have depended on IBM. Governor Cuomo announced in February that IBM is going to preserve 3,100 jobs in the Hudson Valley, add 500 jobs in Buffalo through a new state-owned center. Let me see if I can do this - the Buffalo Information Technology Innovation and Commercialization Hub, and that IBM is going to be the first tenant, bringing 500 new jobs. So, you know, they say they're bringing jobs.
MOORE: Well, their headcount has overall declined modestly this year. So they're not actually bringing jobs. But it is fair for them to point out, because they are investing in other areas, right? And so, for instance, they're investing in the cloud, you know, you've heard Amazon and Google talk about the cloud, the area where we store all of our information essentially on servers. And they're investing $2.2 billion in that.
You know, in the case of the jobs added in New York, some of those are replacing jobs that IBM cut last year. And they cut something like 700 jobs in New York not too long ago. So the promise to the state actually restores some of those jobs in addition to bringing more jobs to New York. I don't think anyone is going to argue that that is great.
But what is inarguable is that as of this moment, the jobs that they're cutting are probably far above the jobs that they are currently planning to add. And another, you know, sort of comparison point is that IBM is spending $20 billion to buy back its own stock. And that's because to get to $20 earnings per share, they're essentially making sure that there are fewer shares out in the market. So they're trying to get that number through another way. And you can just imagine if they're spending $2 billion on, you know, improving their cloud offerings, imagine what spending $20 billion on buying back their shares means.
So it doesn't indicate that IBM necessarily has a shortage of money. It just indicates that they are very committed to this strategy of getting very specifically to the number of $20 earnings per share.
YOUNG: A cautionary tale about making promises maybe you can't keep. Heidi Moore, U.S. economics editor for The Guardian newspaper, thanks as always.
MOORE: Thank you.
YOUNG: And, Jeremy, you have news about someone who is willingly leaving his job.
JEREMY HOBSON, HOST:
That is true. Some bittersweet news from NPR today. Carl Kasell, longtime NPR newscaster and WAIT WAIT...DON'T TELL ME! announcer, is retiring. He will do his last show, WAIT WAIT...DON'T TELL ME!, this spring.
HOBSON: We just got this tweet from Peter Sagal, the host of WAIT WAIT...DON'T TELL ME! He says: Really big news from us. We're losing any pretense of dignity we ever had.
YOUNG: Well, we know - get your recording machine requests in soon.
HOBSON: Exactly. That's going to be the last time, I guess, that he's going to have to leave his voice on listeners' answering machines, and hopefully he's happy about that. Enjoy your retirement, Carl Kasell.
YOUNG: Right. Well, it won't be till this spring. Transcript provided by NPR, Copyright NPR.