Kiger's Notebook

Are big layoffs imminent at IBM Roch.?

The buzz in the tech community is that Big Blue has a big layoff moving coming down the pipe following its recent disappointing earnings report.

Insiders say this layoff could be bigger than IBM's typical spring jobs cut. In fact, it supposedly has its own secret project code name - Project Mercury. If accurate, I wonder if that means fast response to the falling sales and earnings?

If anyone has any info that they can share about whatever might be coming, I'm very interested. I will protect your identity to protect your job or severance package, if necessary.

If the expected layoff happens on May 28 to May 30, I am also very interested in talking to any of the victims who are willing to talk. It is so hard to track this kind of thing amid such an obessive culture of secrecy.

Not surprisingly, the agressively quiet IBM isn't saying anything. The buzz among the cubes in the formerly nicknamed Fortress Rochester is that this impending ax could chop up to 25 percent of the remaining staff here in the Med City.

Of course, a percentage doesn't mean much since no one (outside of the inner circle of IBM big wigs) has any clue how people work on the Rochester campus these days.

I once asked IBM's top Minnesota exec Walt Ling that question directly, "How many people work here in Rochester? It seems like the numbers keep going down."

He turned his chair to look out over the parking lot and gestured broadly, "Just look at all of the cars in the parking lot. I'd say we're doing pretty well."

Out of the corner of my eye, I could see the communications staffer tense up like they were about to go into convulsions.

For many years during very tough times in the tech industry, IBM used to announce its Rochester "population" or body count at the end of every year.

The last instance of that was on Dec. 31, 2008. On that day, IBM said it had 4,200 official Big Blue employees in Rochester. That means it didn't include contract workers like ones from CTG, Manpower or whatever.

Despite very active adjustment of staffing to meet the market needs, the number of Big Blue workers on Rochester stayed at the exactly same level – 4,400 from 2004 to 2007. Back then, that seemed amazingly consistent to me.

 

 In 2003, IBM said it had 4,500 employees in Rochester. In 2002, it was 4,600 and the number IBM reported in 2000 was 5,000.

Tech columnist on Decline and Fall of IBM

I've pointed out the writings of well-known tech columnist Bob Cringely and his dire (and sometimes accurate) predictions about IBM.

As a long-time tech writer, he seems to have to pretty good grasp of how IBM has changed over the years. He has always been very critical of Big Blue's management, which he sees as creating profits at the expense of their employees instead creating of good technology.

Cringely's latest prediction is that IBM will withdraw its 401K contributions for its employees. They have already made some significant changes in that area, from shifting from making 401k contributions in every paycheck to doing it just once a year.

I wonder what local IBMers think about that. Is it possible? Could that be in the works?

The Decline and Fall of IBM is the headline of Cringely's latest column as well as the title of an e-book that is releasing soon.

Here's an excerpt from the column:

IBM is in trouble, you see, serious trouble caused primarily by executive corrosion from within. Not only did Big Blue miss its earnings target last quarter for the first time in years, if the rumors I am hearing are correct the company’s primary response will be to screw U.S. employees even more than they have already.

The rumor I’ve heard is that IBM, which not long ago changed its 401k contribution policy to push what had been a biweekly payment into an annual one right at the end of the year, may have decided this year (and in the future?) not to make any 401K contribution at all. Since IBM’s U.S. employees can divert up to eight percent of their gross compensation into the 401K and IBM has traditionally made a comparable matching payment, this possible change in compensation policy could save the company close to $1 billion.

In one sense one might ask what’s wrong with that? Companies have to do what they have to do in this economy and workers sometimes suffer. But for IBM it indicates the company is getting near the bottom of its bag of tricks for maintaining earnings growth toward that ambitious 2015 goal of $20 per share. Management seem to be down to three ideas to improve the numbers: 1) savage the 401K plan; 2) sell the low-end server business to Lenovo for a reported $2.5 billion, and; 3) expect a miracle called PureSystems.

 

 

 

Plug pulled on IBM's record breaking computer Roadrunner

IBM's record-breaking Roadrunner supercomputer was the fastest computer in the world when introduced five years ago.

But this week, it was retired and soon will be dismantled, surpassed by other machines in the fast-evolving world of supercomputers.

The Roadrunner, which owed much of its hybrid design and manufacture to Big Blue's Rochester campus, was the first machine to break the computer industry's "sound barrier" in 2008 by clocking a petaflop or one quadrillion calculations per second.

“We just all looked around and said, ‘We made it,’” stated Peter Keller, who was part of the Rochester manufacturing team that recorded that historic milestone on May 25, 2008.

The plug was pulled on the $121 million supercomputer on Easter Sunday at Los Alamos National Laboratory in New Mexico.

"Roadrunner, while I would not define it as strictly obsolete, it has been surpassed by newer technology," said Kevin Roark, of Los Alamos. "It's perfectly normal. …This is the natural progression."

Roadrunner's duties are being shifted over to Los Alamos' Cielo supercomputer, which is made by Seattle-based Cray Inc. Two years younger than Roadrunner, Roark describes it as faster, smaller, less expensive and more energy-efficient than its IBM predecessor.

Until it was shut down, Roadrunner ran 24 hours a day, seven days a week since being delivered to the laboratory via 25 trucks.

While it now is being experimented on as it waits to be dismantled and shredded, Roadrunner took Los Alamos' work on the United States' nuclear weapons stockpile to a new level.

"It has performed remarkably well. It has really helped us solve some fundamental problems that were essentially unsolvable before a computer of its speed," Roark said.

It wasn't just its speed that made Roadrunner so groundbreaking. The revolutionary hybrid design that coordinated the use of different types of computer chips, including Cell chips originally designed in Rochester to be used in Sony's PlayStation 3 video game system.

"Roadrunner was a truly pioneering idea," said Gary Grider, of Los Alamos' High Performance Computing Division, in a statement. "Roadrunner got everyone thinking in new ways about how to build and use a supercomputer."

Los Alamos teamed up with IBM to build Roadrunner from commercially available parts. They ended up with 278 refrigerator-size racks filled with two different types of processors, all linked together by 55 miles of fiber optic cable.

The supercomputer has been used over the last five years to model viruses and unseen parts of the universe, to better understand lasers and for nuclear weapons work. That includes simulations aimed at ensuring the safety and reliability of the nation's aging arsenal.

Roadrunner was the world's fastest computer for 18 months. At its peak, it was two times faster than Blue Gene/L, which was IBM’s star machine and the fastest computer in the world in 2007.

Its historic speed kept Roadrunner on the Top 500 Fastest Computers list, despite being outdated. It still ranked as 22nd fastest machine in the world in November.

IBM had four of the top 10 fastest computers on that November list, and all had roots in Rochester. Sequoia, a BlueGene/ Q, took the No. 2 spot behind Cray's Titan. Other BlueGenes — Miram JUQUEEN and Fermi — locked up the fourth, fifth and ninth spots.

Big Blue retirement plan changes has workers seeing red

Big Blue's change to their 401(k) retirement plans has some IBM employees seeing red.

IBM sent staff a notice this week that in 2013 it will cease paying into their 401(k) plans semi-monthly with every paycheck. Instead, the matching discretionary contributions will be made just once at the end of the year.

While that on its own has a pro-union group organizing a petition of protest, IBM added the rule that workers must be employed on Dec. 15 to get the annual 401(k)matching payment.

That means, a employee laid off in November 2013 would not get their annual 401k payment from IBM.

"The problem is, that as everyone knows, IBM has job cuts all year long," says Lee Conrad, spokesman for the Alliance@IBM. "We're asking IBM to reverse this decision, because it financially compromises all IBM employees, even the ones who are not laid off."

For its part, IBM is saying that its 401(k) plans are still better than most companies and this change is necessary keep up with the increasingly stiff competition in the technology industry.

"IBM’s 401k plans remain among the best in the industry – and the country," stated the company in a response release by spokesman Doug Shelton. "This change reflects our continuing commitment to invest in our employee 401(k) plans while maintaining business competitiveness in a challenging economic environment."

The plan, which is considered generous by most companies, gives employees hired prior to 2005 get a dollar-for-dollar match up to six percent of eligible pay. People hired since then get up to a 5 percent match.

If the employee is eligible, IBM will make automatic contributions to their plan, even if the employee doesn't participate. The amount of automatic contribution earned depends on the pension plan that an employee qualified as of December 2007.

No matter how generous the plan, this is not not positive change for employees who have counted on those semi-monthly payments throughout the year, says Conrad.

"This is IBM is just hanging onto the money as long as they can," he says.

The Alliance@IBM, which is pro-union group, expects to soon have a petition ready for employees and their families to sign. It is hard to say how much interest that will attract given IBM employees' well known reluctance to publicly defy the company for fear of losing their jobs.

It is hard to say how this change could impact IBM's Rochester campus and its unknown number of employees. For many years, IBM has declined to say how many people it employs here or elsewhere. The last official IBM tally of its workers in Rochester was 4,200 way back at the end of 2008. There have been many layoffs euphemistically called "resource actions" by the technology giant.

While IBM is commonly believed to be Rochester's second-largest employer behind Mayo Clinic, there is no evidence to prove that is still true.

Speculation over IBM's future in Fishkill

Here's some from an interesting story from the Poughkeepsie Journal, which keeps a close eye on action at Big Blue.

Like in Rochester, the communities in New York have a lot of trepidation about IBM's moves concerning jobs and facilities.

--------------------

WICCOPEE — Could IBM East Fishkill one day not be IBM?

A British analyst’s strong speculation that IBM Corp.’s microelectronics business would be sold someday to GlobalFoundries, one of IBM’s chip partners, has put on the table what many in the industry have wondered or whispered.

IBM doesn’t comment on such speculation.

Ronald Hicks, Dutchess County’s deputy commissioner for economic development, said of analysts: “They are speculators, and the best of them are right, and very few are.”

-------------

Were it to happen, it would cast a big question mark over the future of the plant in the Town of East Fishkill near Hopewell Junction, which for decades has been IBM’s major microelectronics center.

That site remains one of the largest employers in the mid-Hudson Valley and has a large portion of IBM’s approximately 7,900 employees in Dutchess, plus people who work for other companies.

Loss of the plant could take hundreds of millions of dollars of income out of the local economy, cost potentially thousands of jobs and leave several million square feet of ex-IBM space empty. Marketing such old space has proved difficult, as in the case of the former site near Kingston, now called TechCity, which remains only partially occupied after IBM shut it in the mid-1990s.

Future Horizons Ltd., a respected industry analyst firm in England, recently did a report for the European Commission to help advance the evolution of the industry in Europe and catch up with the American competition. News reports say its authors offered comments that they assumed GlobalFoundries will purchase IBM’s semiconductor division.

 

IBM earnings hold steady, despite weak revenue

Here's a take on IBM's quarter earnings report by the AP with a Rochester angle added.

Were there any other Rochester-specific aspects to this report that I missed?

--------

Technology business worldwide is sputtering, affecting the bottom line for many suppliers. But Big Blue is holding steady, despite weak revenue.

IBM delivered solid quarterly profits on Wednesday that easily surpassed Wall Street's expectations, even though it reported lower revenue because of economic troubles in some markets, lower hardware sales and the impact of a strengthening dollar.

Net income increased 6 percent to $3.9 billion, and revenue dropped 3 percent to $25.8 billion.

IBM was sufficiently encouraged by the results to slightly lift its guidance for the full year to "at least $15.10 a share," from $15 a share previously.

Success was partly fueled by several of the projects in which IBM's Rochester facility was a key player. That includes the Blue Gene super computing program that created Sequoia, which was recently ranked as the fastest computer in the world. In addition, revenue from the Smarter Planet initiative, which hopes to create interconnected, efficient systems, is up more than 20 percent in the first half. Cloud revenue doubled in that time.

The introduction of the PureSystems family of machines, which were designed in Rochester and are being made here, did not affect this quarter's earnings. IBM expects volume shipments of PureSystems to begin in the fourth quarter.

The quarterly result, said A.M. Sacconaghi, an analyst at Sanford C. Bernstein, pointed to "fortress IBM," a company whose profit performance seems all but impervious to industry cycles.

The company, Sacconaghi noted, has raised its full-year guidance in 12 of the last 14 quarters and met or beat Wall Street's average earnings estimate for 29 consecutive quarters. "It's boringly predictable," he said.

IBM is the largest global supplier of information technology — hardware, software and services — to corporations and governments.

In a statement, Virginia Rometty, IBM's chief executive, said the strong profit performance reflected the success of the company's "long-term business model." That model combines focusing on higher-margin businesses and faster-growing markets abroad with aggressive cost-cutting. The strategy has served the company well, with earnings improving steadily throughout the recession and financial crisis.

But the second-quarter report was also the fourth straight quarter that IBM's revenue has fallen below Wall Street's estimates. "But revenue growth is the missing piece of the puzzle in the long term," said Steven Milunovich, an analyst at UBS.

IBM share rose. At mid-morning today, shares were up $7.79, or 4.14 percent, to $196.04 a share. Wednesday, the company's stock price closed up $4.60 at $188.25 a share.

IBM to give raises to India employees, but while holding back in U.S.

Here's a kind of interesting follow-up to the IBM news that Big Blue will not give raises to most its Global Technology Services (and possibly other units) employees.

A memo did go out about the lack of raises, though an IBM media person answered a question about it by saying raises would still be given to people with "High Demand Skills."

The Times of India (a very good newspaper that I often read) says that IBM will give its workers in India raises. That adds up to this equation - India = high demand skills.

Here's some from an article by Shilpa Phadnis & Sujit John:

IBM is likely to give a salary increment to its employees in India next month.

Early on Thursday, international media reported about a mail that IBM had sent to employees, saying those in the Global Technology Services (GTS) division would not receive a salary increment this year. However, the mail also said people "who have high-demand skills" would receive an increment .

Sources within IBM India indicated that "high-demand skills" refers, among others, to employees in India . The sources said that the performance assessment exercise had been completed and increments were expected across the organization in India next month. IBM follows a July-June cycle. "For the best performers, the increment may be in double digits ," one source said.

IBM does not break up its headcount by geography, but it is estimated that the company employs over 1.3 lakh people (130,000) in India. The company has been an aggressive hirer in India for several years. With several Indian IT companies …  announcing salary increments  earlier this year, it may be difficult for IBM not to follow suit.

IBM - No raises in 2012 for most of Global Tech. Services

Big Blue sent out an employee e-mail to its massive Global Technology Services unit this week saying don't expect any raises in 2012, particularly if you are an exec.

GTS has a big presence in Rochester, which just announced creating five of the top ten world's fastest computers. Business Insider reported on this and then Computerworld followed up on it.

Any local IBMers have comments on this? Is it accurate? How big of a deal is this, if at all?

 Here's the email that Business Insider released:

GTS Employees,

The Employee Salary Program takes into account a number of elements, including compensation competitiveness in markets we serve, our ability to attract and retain people with skills we need, our business performance, and other employee investments.

It is essential for a services business to provide value-added services to clients at competitive price points.  Our objective is to ensure a competitive labor cost structure while moving aggressively into areas that are strategic to our clients and require innovative solutions.  This is fundamental to driving clear return on investments for our clients and to increase opportunities for all IBMers.

To balance our ability to remain competitive with the need to invest in people who have high-demand skills, there will not be a broad-based salary program in GTS in 2012.  Instead, we will target the 2012 investment to skill groups or focus areas as identified by each GTS line of business, based on local market needs.  These decisions do not affect the significant investments IBM makes each year in talent in addition to salary, including bonus programs, recognition, promotions, and skill development.

Your manager or leadership team will communicate additional information to you over the next few weeks.

Bob Zapfel
General Manager, Global Technology Services, North America                  

Richard A. Patterson
General Manager, GTS SO Delivery - Americas

Here's some from Computerworld's story on this:

IBM this year won't be awarding pay raises to its executives or to many of its workers.

The company said it is only giving pay raises to workers with high-demand skills that the company needs.

IBM typically awards raises during the mid-year period.

"There are targeted skill groups of employees that are eligible for salary increases in 2012," said Trink Guarino, an IBM spokeswoman. "No executives will be eligible for salary increases."

Business Insider Tuesday published an internal IBM memo announcing the action that was sent to employees from from Global Technology Services executives.

One IBM employee, who didn't want to be identified, said he believes the lack of pay raises "is part of IBM's hyper-aggressive plan to meet its 2015 roadmap."

That IBM roadmap lays out an aggressive growth strategy, which calls for increasing the company's earnings per share by $20 by 2015.

The employee noted that the company has been spending billions in stock buybacks, but says it can't afford pay increases.

And obviously, IBM continues to cut large numbers of jobs, including many in Rochester. It ominously refuses to release any numbers citing competitive reasons, despite the fact that many of its competitors do release numbers like that.

 

 

Big Blue tops world's fastest computer list with Roch. systems

Here's a little from my two lengthy stories in today's paper about IBM's rocket ride back to the top of the world's fastest super computer list and Rochester fueled it.

This is mainly focused on the Blue Gene/Q systems. I have more focusing on the new warm-water cooled SuperMUC system in another piece in print.

After a few years in the middle of the supercomputing pack, Big Blue rocketed to the top spot by running a world record-breaking speed of 16.3 petaflops and capturing five of the top 10 rankings in the latest international list of top supercomputers.

And Rochester is in the driver's seat for this IBM resurgence.

"It's the Academy Awards of what we do. This is the thing you go after," says Andy Schram, the proud project executive for Blue Gene supercomputers in Rochester. "But it's not a beauty contest. You actually have to perform. They have to deliver value to the client."

The Rochester-made Blue Gene family of machines and the new water-cooled SuperMUC machine certainly delivered.

When the twice-annual Top 500 supercomputer list was unveiled Monday, IBM's Sequoia Blue Gene/Q machine roared into the top spot, past Fujitsu’s K Computer, which had held that ranking on the last two lists in November and June 2011.

Mira, another Blue Gene/Q, took third place with 8.1 petaflops. Two other Blue Gene/Qs were at Nos. 7 and 8; while the SuperMUC system was No. 4.

In all, 15 Blue Gene/Qs were ranked in the top 100. They were all designed, manufactured and tested by several hundred staffers in Rochester. 

 

I want your IBM stories - past, present and even future

While I have written many, many things during my years at the Post-Bulletin, they have never been my stories.

The columns, stories and even blog postings have always come from the people of Rochester and the surrounding areas.

Now I'm considering trying to tell a story that can only happen with your help.

IBM has long been a major part of Rochester. During its years here, Big Blue has gone through many changes, corporatewide as well as locally.

I'd like to map out the evolution of IBM during its almost 60 years in Rochester, mainly from the employee's perspective. And taking it a step beyond, I'm interested in local impressions of what IBM's future in Rochester might look like.

I'd really like to speak to any past or current employees and contractors willing to share their memories and thoughts on local IBM culture changes from the Fortress Rochester days of the AS/400 to the dark days of the 1980s to the resurgence when the "elephant was taught to dance" on to the time of Blue Gene, Watson and the PureSystems.

To form a complete picture, the hope is to have a full discussion with many people with different experiences about IBM's successes and innovations as well as about the tough times and the layoffs.

As a massive company that is an international technology leader, its evolution is a complex story.

I'd like to try tell as much of that story as possible through the words of the southeastern Minnesota people that have and are living it.

If you'd like to participate or to know more, contact me at 285-7798 or at jkiger@postbulletin.com.