Category Archives: IBM

IBM End to Buyback Splurge Pressures CEO to Boost Revenue

IBM

by  Alex Barinka, published April 21, 2014, at Bloomberg

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Virginia “Ginni” Rometty, chief executive officer of International Business Machines Corp., speaks during a keynote address at the Mobile World Congress in Barcelona, Spain, on Feb. 26, 2014. Photographer: Angel Navarrete/Bloomberg

International Business Machines Corp. is reducing stock buybacks after an $8.2 billion first-quarter splurge, putting more pressure on Chief Executive Officer Ginni Rometty to reignite sales growth or cut costs to hit her profit targets.

IBM said last week it won’t sustain its rate of share repurchases in the first quarter, when buybacks more than tripled from a year earlier to the most since 2007. The company plans to spend less than $5.8 billion total in the final nine months of this year.

Rometty has kept herself bound to IBM’s targets of at least $18 a share in adjusted earnings this year and $20 next year even as she tries to revamp the company in a shifting technology industry. With sales declining, she had ramped up repurchases, helping her hit projections for earnings per share simply by reducing the number of shares in circulation. Now Rometty must start increasing revenue or reduce expenses further — or risk missing the profit goals.
“You’ve got a bleak picture ahead if you continue to stick with this EPS guidance,” Nicole Black, a fixed-income analyst at Wells Fargo & Co., said in a phone interview. She has the equivalent of a sell rating on IBM bonds. “You’re not delivering organic internal revenue growth. There is not a lot of fat to be cut.”

IBM should consider using its cash to make more acquisitions that will help it grow, Black said.

Mike Fay, an IBM spokesman, declined to comment.

‘Stunning’ Support

Rometty’s first-quarter buyback bonanza was 41 percent higher than the $5.8 billion estimated by Barclays Plc. The repurchases made up “a stunning” 14 percent of all stock traded in the quarter, Toni Sacconaghi, an analyst at Sanford C. Bernstein & Co., said in a report last week. He said that helped support IBM shares, which rose 2.6 percent in the period, compared with a 1.9 percent gain in technology stocks in the Standard & Poor’s 500 Index.

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Looting Made Easy: the $2 Trillion Buyback Binge

Counterpunch, IBM

by Mike Whitney, published on August 28, 2015 at Counterpunch

Corporations are taking the retirement savings of elderly public employees and using them to inflate their stock prices so wealthy CEOs and their shareholders can enrich themselves at the expense of their companies. And it’s all completely legal. Under current financial regulations, corporate bosses are free to repurchase their own company’s shares, push stock prices into the stratosphere, skim off a generous bonuses for themselves in the form of executive compensation, and leave their companies drowning in red ink.

Even worse, a sizable portion of the money devoted to stock buybacks is coming from  “massively underfunded public pension” funds that retired workers depend on for their survival. According to Brian Reynolds, Chief Market Strategist at New Albion Partners,  “Pension funds have to make 7.5%,” so they are putting their money “in these levered credit funds that mimic Long-Term Capital Management in the 1990s.” Those funds, in turn, “buy enormous amounts of corporate bonds from companies which put cash onto company balance sheets…and they use it to jack their stock price up, either through buybacks or mergers and acquisitions…It’s just a daisy chain of financial engineering and it’s probably going to intensify in coming years.”   (“How a Public Pension Crisis Is Driving an Epic Credit Boom“, Financial Sense)

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IBM is so screwed

Cringely, IBM

by Robert Cringely, published July 21, 2015

I’ve been working on a big column or two about the Office of Personnel Management hack while at the same time helping my boys with their Kickstarter campaign to be announced in another 10 days, but then IBM had to go yesterday and announce earnings and I just couldn’t help myself. I had to put that announcement in the context you’ll see in the headline above. IBM is so screwed.

Below you’ll see the news spelled-out in red annotations right on IBM’s own slides. The details are mainly there but before you read them I want to make three points. First, IBM’s sexy new businesses (cloud, analytics, mobile, social and security or CAMSS) aren’t growing — and probably won’t be growing — faster than its old businesses are shrinking and dying. This doesn’t have to be. IBM could carefully invest in some of those older businesses and become a much better company and investment.

Second is something that doesn’t immediately fall out of these slides but I think it should be said: from what I hear IBM’s analytics sales (the very essence of its Big Data strategy) have been dismal. Nobody is buying.

And a third point that could be an entire column in itself is that Google’s two latest cloud announcements (support for Windows Server and broad release of its Kubernetes container manager) effectively blow out of the water IBM’s nascent cloud operation.

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THE CASE FOR A 21st CENTURY NEW DEAL – A FAIR RETIREMENT FOR PEOPLE

21st Century New Deal, IBM, New Deal Progressives, Retirement

Meet Chris. He has worked at Caterpillar for almost 40 years as a white collar employee in IT. He is approaching retirement; his traditional pension benefit will be about $1000 per month ($12,000 per year). When he retires, Chris will pay about $560 per month for health insurance benefits for he and his wife, even with Medicare. In 1974, the Caterpillar CEO made $325,000 per year and employees retired with a good pension which included health insurance at no cost. In 2013, the Caterpillar CEO made $12 million per year and he can expect a generous retirement package with almost all benefits paid thanks to Caterpillar; in contrast, employees’ retirement benefits have been cut and health insurance premiums have been increased including paying more for drugs. Chris has other investments that will help him during his retirement, but as he said, “without them I would have to keep working until I die.”

Meet Ruth. She worked at IBM for 17 years. In 2001, IBM eliminated its traditional pension plan and went completely to 401K plans. Employees with a significant amount of time in the traditional pension plan ended up losing a significant part of their retirement savings even after winning a lawsuit against IBM. Employees with less time in the traditional retirement plan received a check for a couple of hundred dollars as a settlement. In 2002, IBM CEO Lou Gerstner retired with a $190 million package, and in 2012, IBM CEO Sam Palmisano retired with $271 million package. Ruth was laid off in 2004 and has no retirement from IBM; work has been hard to come by since then due to the economy. If and when she retires, she will have a meager Social Security check monthly and her savings and insurance from her husband’s death to live on.

Meet Dennis. He retired from Delta Airlines as a pilot. When Delta declared bankruptcy and divested itself from its pension plan in 2005, it turned its pension responsibilities over to Pension Benefit Guaranty Corporation (PBGC). Dennis’ pension went from $1939 per month to $95 per month. In 2012, the Delta Airlines CEO pay package was $8.9 million.

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Look how IBM plays the H-1B Game

IBM, KAAW, Labor

by Virgil Bierschwale, published October 2, 2014 at Keep America At Work 

Pay attention to the difference between the prevailing wage and the proposed wage between the different groups.

First we have IBM Managers

http://keepamericaatwork.com/?page_id=208&occ_code=11-0000&cname=IBM_CORPORATION&cstate=TX&ccity=AUSTIN

You will notice that these are paid 15,000 or more  over the prevailing wage.

Now let’s drill down to the business and financial operations group.

http://keepamericaatwork.com/?page_id=208&occ_code=13-0000&cname=IBM_CORPORATION&cstate=TX&ccity=AUSTIN

Again, good premium over prevailing wage except for the rank and file.

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RETIREMENT HEIST: A REVIEW

IBM, Labor

by Left Labor Reporter

reitrement-heist_custom-0ea527a54a4ceb2c93cf1c435cbc63691df38b1e-s6-c30A plan by a group of Houston millionaires to eliminate traditional pension benefits for Texas’ public employees has begun to take shape. The Texas State Employees Union recently broadcast an outline of a proposal from an anti-public service policy organization for eliminating pensions for local and state government employees, public school teachers and other staff, and public higher education employees.

The proposal from the Texas Public Policy Foundation (TPPF) puts on paper the ideas expressed by Houston financier Bill King, who the Austin American-Statesman reported plans a public relations campaign to eliminate public pensions in Texas. The report said that King and his millionaire friends would finance the campaign.

The TPPF proposal takes a path similar to the one that corporations took to undermine traditional pensions and retirement security for millions of workers in the private sector. Ellen Schultz maps this path in a book entitled Retirement Heist: How Companies Plunder and Profit from the Nest Egg of American Workers.

In Retirement Heist, Schultz, an investigative reporter for the Wall Street Journal, who has covered the pension crisis for more than a decade, describes strategies that corporate executives, financial firms, and various consultants used to loot the pension plans of their workers, which in most cases resulted in the demise of traditional defined benefit pensions.

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What has IBM Wrought?

IBM, Labor, New Deal Progressives

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The CWA’s (Communication Workers of America union) Alliance@IBM Employees jobs cuts website has an interesting view of what’s going on inside IBM from its union employees in lieu of all the constant layoffs that are going on despite record quarterly profits.

Seems like no matter how good the quarterly numbers come in, more employee layoffs result in the U.S. and the number of employees increase in India and China.

In 2000, IBM had a U.S. workforce of 153,587; in 2014, it’s an estimated 83,000.

Lately, it looks like IBM HR is manipulating annual employee performance review scores as a way to cut workers and then skip paying full severance to those they  lay off.  This was GE CEO Jack Welch’s favorite way to keep employees on edge and goose up earnings.

It’s been a mess over at IBM since back in 1993 when Lou Gerstner was hired by the Board to run IBM.  One of his first actions was to cut 60,000 jobs to the tune of $8.9 billion in write-offs.

There continued to be layoffs throughout his tenure, but IBM kept numbers low enough to stay off the news programs and out of the main news pages; at one point IBM estimated that keeping layoff numbers just under 7000 per month would avoid excessive scrutiny and bad press for a company that was allegedly rebounding.

Gerstner was strictly a numbers guy.  He went to Harvard and came to IBM via McKinsey & Company management consultants, American Express, and RJR Nabisco. KKR (Kravis Kohlberg Roberts &Co.) is the notorious leveraged buyout firm who acquired RJR Nabisco  and installed Gerstner as its CEO.  The RJR Nabisco takeover inspired the book and movie “Barbarians at the Gate: The Fall of RJR Nabisco“, an ode to corporate greed and stupidity.  After the acquisition was completed, RJR Nabisco was broken up and sold off piece-by-piece until it stopped operating as a single entity in 1999.

While he was at IBM, Gerstner implemented a lot of gimmicks to increase the stock price and company valuation including enacting stock buybacks when the stock price was at its highest, which is a very stupid use of money, unless of course it’s being done to increase one’s own bonus.

In one of his numerous grabs for taxpayer dollars for corporate welfare, there was Gerstner was on-stage with Bush collecting a huge government handout (well over $1 billion) for “business interruption” compensation resulting from the 9/11 attacks.  IBM increased the amount of local, state, and federal tax breaks and subsidies it collected during Gerstner’s term.  Some states found out too late that IBM would grab the money and then close their facilities at a later date leaving people unemployed and taxpayers holding the bag.

In another Gerstner move, employees were classified as management (staff) in order to avoid paying overtime; most employees regularly put in between 50-60 hours per week for 40 hours pay.

One of his final acts was to convert pension plans from traditional defined benefit pensions to 401Ks. They did this over a weekend to attract as little attention as possible from employees.

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