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A SPECIAL ANNEX NEWSFLASH
Will IBM Announce the Bad News Tomorrow?
Looming IBM Layoffs
Also, IBM CEO vs. CFO: A "Yin" and "Yang" Story
PHOENIX, May 14 - How many people will IBM lay off? When? Where?
Those are the questions we have been having to answer over and over again, ever since we revealed a week ago that the IBM CEO warned his employees on Apr. 24 about upcoming cuts (see "Sam Is No 'Change Agent'," May 6).
The numbers floated in the media by various Big Blue soothsaying tooth fairies have ranged from a low of 8,000 jobs (2.5% of total IBM employment), to a high of 36,000 (11%). The truth is... nobody knows for sure. Not even Sam Palmisano.
Well, maybe Sam knows it by now. For, we expect IBM to reveal the actual numbers just before or at tomorrow's (Wed., May 15) analyst conference. But nobody could responsibly have "known it" last week, while deliberations were still going on at Armonk and elsewhere in the Big Blue land.
And what do we expect IBM to announce?
Well, if IBM has indeed misjudged the demand by at least 10 points, which is what its CEO implied on Apr. 24, then the cuts should be quite severe... perhaps in the 10% to 15% range (i.e., 32,000+ jobs).
Here in the U.S., where most of the job cuts will be made, the IBM rumor mill is abuzz with stories about a possible closure of Endicott, IBM's original homestead, and of steep downsizing of Burlington (VT), and some other upstate New York IBM plants.
Ditto, of course, at the Rochester, MN, facility, the home of the AS/400 and the RS/6000 midrange servers (now known as iSeries and pSeries). And even the employees at the IBM Raleigh, NC, Research Triangle location are nervously twitching in anticipation of the Armonk announcement.
No surprise there. We predicted as far back as March 1990 that there is no long-term future in hardware businesses (see the Industry Stratification Trend, Mar. 30, 1990). And we said six years ago that the Big Blue should be broken up and get rid of some of its hardware businesses (see "Break Up IBM!", Mar. 1996). So it was just a matter of time before Armonk realized it, too... 12 and six years later, respectively.
But even the IBM Global Services won't be spared, according to some IBM sources. Which would be ironic given that this erstwhile IBM "crown jewel" had just added in 2001 some 14,000 new employees to its payroll.
Hiring one year, firing the next... not exactly a stellar example of foresight and good planning, is it? But it may be a good candidate for a case study in knee-jerk management.
Overseas, one former IBM U.K. executive expects this Big Blue subsidiary to cut about 3,000 jobs in Great Britain - about 15% of the total. Elsewhere in Europe laying people off will be more difficult, due to the protective EU employment laws. But IBM Europe has already been through all that some 10 years ago, so at least they will be walking down a well-trodden path.
No Funeral Lament: First the Band Goes, then the Director, then the Plant...
If IBM does close its Endicott facility, that will be like taking the torch to grandpa's and grandma's homestead. Endicott is where IBM's roots are. This is where IBM was nurtured from diapers into a Big Blue greatness.
But sentimentality and nostalgia has not been the hallmark of the "Louis XIX" reign, the former IBM emperor who still seems to rule the roost, even if from the shadows now.
Last August, for example, Gerstner forced the 86-year old IBM Endicott band to disband. The reason? Cost cuts. And that from a man who raided the IBM treasury to the tune of over $424 million, before heading off to the golf course, while IBM-ers brace for layoffs!? (see "Sir Lou OutLayed Lay!", Apr. 1, 2002).
Here's an excerpt from a Poughkeepsie Journal Aug. 30, 2001 story:
Anyway, if IBM does close Endicott, "there will not be a funeral lament" played by the now disbanded band, the former British IBM-er wryly noted.
IBM CEO vs. CFO: A "Yin" and "Yang" Story
Is New York Attorney General Missing Bigger Fish in His Backyard While Trying to Catch Smaller Fry?
Meanwhile, the New York State attorney general Eliot Spitzer, who has been cracking down on two-faced Wall Street analysts (see SEC Launches Formal Probe of Wall Street Research, Apr. 25, 2002), may be going after the relatively small fry while missing some bigger fish in his own backyard (Armonk, NY).
Analysts and their employees are being threatened even with criminal prosecution for talking out of both sides of their mouths. And with good reason. But what about the executives who do talk out of both sides of their mouths?
Check out the mixed signals that the IBM CFO and the IBM CEO have been sending to the marketplace. The CFO's optimistic remarks were made "on the record," during the IBM first quarter analyst call. Following John Joyce's remarks, the IBM stock predictably rose four points (see "A Disastrous Quarter," Apr. 17). The CEO's pessimistic comments were made in Palmisano speech to employees only (see "Sam Is No 'Change Agent'," May 6). IBM shares tumbled about 7% to a new 52-week low following our publication of that Annex Bulletin:
Will the real IBM CEO please stand up? For, IBM employees and shareholders have had it with all the yin-yang's and double-talk that have marked most of the nine years of the Gerstner administration. They don't need it from the supposedly "new" CEO as well. And they are evidently responding to Palmisano's mixed signals by driving the IBM stock down to new lows.
So if the lowly Wall Street analysts are being threatened with criminal prosecution for misleading investors, what do you suppose the principal actors in such sordid "Enronitis" replays deserve? A taxpayer-paid "vacation" in Guantanamo Bay, including a shared cell with the Al Qaeda and the Taliban warriors?
How about it, Mr. Spitzer?
Happy bargain hunting!
[Also check out… "Sam Is No 'Change Agent'," (May 6), Additional Stock Buybacks Authorized (Apr. 30, 2002), "From Here to Eternity" (Apr. 2001), “Tough Times, Soft Deals,” (Apr. 25, 2002), "A Disastrous Quarter," (Apr. 17), Industry Stratification Trend (Mar. 30, 1990), “Gerstner’s Legacy: Good Manager, Poor Entrepreneur” (Jan. 2002), IBM 5-year Forecast 2001: An Unenviable Legacy (June 2001), "Big Blue Starting to Unravel," (Apr. 8, 2002), SEC Launches Formal Probe of Wall Street Research (Apr. 25, 2002), “SEC to Tighten Stock Option Rules” (Apr. 5, 2002), "Sir Lou OutLayed Lay!" (Apr. 1, 2002), "IBM Pension Fund Vapors," (Mar. 23, 2002), Is IBM Cheating on Taxes, Annex Bulletin 99-17 (May 1999), "Break Up IBM!" (Mar. 1996), Fortune on IBM (June 15, 2000), “Smoke and Mirrors Galore,” July 2000), Annex Bulletin 98-14 ("Wag the Big Blue Dog"), Armonk's Fudge Factory (Apr. 9, 1999), Where Armonk Meets Wall Street, Greed Breeds Incest (November 1998), Stock Buybacks Questioned: Is IBM Mortgaging Its Future Again?, 97-18 (4/29/97), "Some Insiders Cashed In On IBM Stock's Rise, Buybacks" 97-22, 7/27/97, Djurdjevic’s Forbes column, "Is Big Blue Back?," 6/10/97; “Executive Suite: How Sweet!,” (July 1997), "Gerstner: Best Years Are Behind", Aug. 10, 1999), "IBM's Best Years Are 3-4 Decades Behind Us" (July 1999), "Lou's Lair vs. Bill's Loft" (June 1999), "Corporate Cabbage Patch Dolls," 98-39, 10/31/98; Djurdjevic’s Chronicles magazine October 1998 column, "Wall Street Boom; Main Street Doom", “Louis XIX of Armonk,” (Aug. 1996) etc.]
Volume XVIII, Annex Newsflash No.
Editor: Bob Djurdjevic
P.O. Box 97100, Phoenix, Arizona
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