You've Got To Save To Be Able To Spend - IBM Starts Cutting Jobs

Feb 27 2014, 8:49pm CST | by

Over the past couple of months we’ve had some high profile, high impact announcements of some major investments by IBM. $1.2B going towards rolling out Softlayer to further global locations. $1B to move lots of IBM software over to the cloud and $1B to extend the reach of their high profile Jeopardy-beating software Watson. It seems that all we hear of late (other than well aimed kicks in Amazon Web Service’s direction) are some big bets and big spending by Big Blue.

But things don’t always work in that direction and today is a case in point. Bloomberg is reporting that the company has begun today on a round of layoffs that are part of a broad $1B restructuring project. According to the article, staff across the US have been fired – including employees in New York, Vermont, Minnesota, Iowa, Missouri, Oklahoma and North Carolina. The company is also slicing jobs globally and some analysts suggest that some 13,000 of its 430,000 or so employees could be set to go this year alone.

These cuts come amidst IBM’s stated aim of an adjusted earnings for the 2015 year of almost twice that they earned in 2010 – given the fact that technology revenues generally are being squeezed, this growth is all the more problematic. It also speaks to the perils of being a publicly traded company in a time of great industry change – more about this later.

Of course it’s easy to look at large staff cuts like this and inflate them to being more important than they are. While they might be unpalatable for those being cut, this is all part of IBM reinventing itself to remain relevant in an environment where customer spend is running head first to the cloud – decimating IBM’s bread and butter of selling hardware for enterprises’ own data centers. It seems that many of the staff cuts are in these areas – and unrelated to the high profile and more promising areas such as Watson, cloud or services. This, along with the fact that 7,000 employees will move over to Lenovo as part of IBM’s $2.3B sale of its low-end server division to the Chinese manufacturer, would appear to be a good place to trim fat.

There are two aspects to this cost cutting. Re-prioritizing areas and downsizing those that show declining revenues is an entirely appropriate step to take. However IBM’s stated goal of $20 adjusted earnings per share is an arbitrary figure that is an example of just how hard it is for a publicly traded company to make fundamental changes to how it works. One of the key reasons that Dell went private was to give it the freedom and the insulation from the vagaries of the market to make longer term strategic decisions without being second guessed every quarter by investors.

IBM doesn’t have this luxury and hence has to have a far more measured approach to changing its business. This makes it very hard for the company to increase the velocity of change. I suspect that further cost cutting will be necessary in order to make up for the costs and revenue reduction that will come as IBM moves itself to the new paradigm of enterprise IT.

Source: Forbes Business

 
 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Drugs to abet cancer cells suicide found
London, Nov 1 (IANS) British scientists have found a drug combination that can trigger the self-destruct process in lung cancer cells -- paving the way for new treatments.
 
 
Climate change threatens global health security: UNEP
San Juan, Nov 1 (IANS/EFE) The rapid propagation in recent years of infectious diseases such as Malaria, Chikungunya and even Ebola is one more example of how climate change threatens global health security.
 
 
US-Japan joint rain radar mission to end next year
Washington, Nov 1 (IANS) After 17 years of groundbreaking 3-D images of rain and storms, the joint NASA and Japan Aerospace Exploration Agency Tropical Rainfall Measuring Mission (TRMM) will come to an end next year, the US space agency said in a statement.
 
 
Al Qaeda threatens to disrupt Australian fuel supplies
Sydney, Nov 1 (IANS) Al Qaeda has urged Islamic militants to attack oil tankers in maritime hotspots that supply Australia with up to 70 percent of its petrol, a media report said Saturday.
 
 
 

Latest from the Network

Al Pacino considered name change
Al Pacino considered changing his name to ''Sonny Scott'' when he started acting. The 74-year-old star was advised to alter his moniker when he began working in the movie industry because any stars with an ''ethnic...
Read more on Movie Balla
 
How to increase your popularity on Twitter
London, Nov 1 (IANS) Having a large number of followers on Twitter is a more efficient strategy to gain popularity on the social networking site than increasing your number of tweets, said a study. Messages from...
Read more on Celebrity Balla
 
US-Japan joint rain radar mission to end next year
Washington, Nov 1 (IANS) After 17 years of groundbreaking 3-D images of rain and storms, the joint NASA and Japan Aerospace Exploration Agency Tropical Rainfall Measuring Mission (TRMM) will come to an end next year,...
Read more on Politics Balla
 
Sexist slur against Nikki Haley; media calls it only a 'gaffe'
Washington, Nov 1 (IANS) Reflecting the falling standard of US politics, the Democratic opponent of South Carolina's Indian-origin Governor Nikki Haley called her a "whore", but more shockingly the mainstream US media...
Read more on Politics Balla
 
Users Facing Wi-Fi Connectivity Issues in the New OS X Yosemite
The OS X Yosemite, the latest version of the operating system for Macs, might have been affected by a bug, as its users are continuing to be frustrated by the Wi-Fi connectivity issue.According to Apple Insider, the...
Read more on Apple Balla
 
Wear your sweatshirt right
Los Angeles, Nov 1 (IANS) A sweatshirt is a must-have item in your autumn-winter wardrobe. Mix it up with jeggings or team it up with hot pants to jazz up the look. Sweatshirts are not only comfortable and cosy, but...
Read more on Celebrity Balla
 
Undergo seaweed body wrap for a beautiful you
London, Nov 1 (IANS) Try seaweed body wraps in a spa for improved skin elasticity and reduction of cellulite. A seaweed wrap is typically made by combining seaweed with hot water and sometimes essential oils, clay and...
Read more on Celebrity Balla
 
When Jake Gyllenhaal went out with real nightcrawlers
Los Angeles, Nov 1 (IANS) Actor Jake Gyllenhaal, who features in "Nightcrawler", found it a "dangerous" experience to venture out in the dark to prepare for his role in the movie. But he found it to be exciting too!...
Read more on Celebrity Balla