Someone leaked to The Wall Street Journal the most obvious sign to date that management at IBM is starting to panic.
In a video address delivered over IBM’s internal network, Chairman and CEO Ginny Rometty delivered what the bible of Wall Street described in its “a rare company-wide reprimand.”
“Where we haven’t transformed rapidly enough, we struggled,” Rometty declared. “We have to step up with that and deal with that, and that is on all levels.”
She mandated a new rule, The Journal noted:
If a client has a request or question, IBM must respond within 24 hours.
Wouldn’t it have been interesting to watch this from one of the video displays at IBM’s big campus in RTP?
After all, the reprimand comes on the heels of such announcements as changes in IBM’s 401(K) plan that could cost workers big bucks if they are laid off before year’s end. The CFO is looking at $1 billion in “rebalancing,” most of which will take place this quarter. Then there has been other criticism …
Working Hard Enough?
This isn’t the first time in recent months that IBM management has hinted at growing worries about performance. A letter obtained and published by Alliance@IBM, the union seeking to represent IBM workers, from Robert Hoey, General Manager, ITS and General Business, IBM Global Technology Services, questioned if IBMers were working hard enough.
“You don’t hear many people in India, Brazil or China (to name a few countries) complain about work-life balance, even though many in these developing countries work 12-15 hour days,” he wrote.
When executives starting talking “ethic ethic,” then something big – and BAD – is happening.
The letter reads in part:
“Research shows that exceptional achievers live longer and that they pretty much work until their death. The 10 most workaholic nations in the world account for most of the world’s GDP.
“I understand that many people are working long hours. I also know some are not working as hard as others. Are you working hard enough to achieve your objectives for 1Q? 1H13?”
Perhaps a more important sign of inner turmoil came ahead of the video leak when news broke that Rod Adkins, a highly respected executive who was a contender for the CEO job that Rometty won, had been reassigned from his position as head of the struggling hardware business.
As IBM’s bad earnings report last week clearly demonstrated, Big Blue’s hardware business is in big, big trouble.
The company’s CFO told analysts he plans $1 billion in “rebalancing.”
And so the rebalancing begins.
Here’s how Bloomberg describes the Atkins’ move:
“Rod Adkins will be senior vice president of corporate strategy … Tom Rosamilia, who has been overseeing corporate strategy, will take charge of the hardware business, reporting to Steve Mills, senior vice president of software, the person said.”
So the head of hardware now reports to the head of software, eh?
Bye, Bye Hardware?
This news will only amplify the talk that IBM is in active negotiations with Lenovo – and perhaps others – to sell off all or parts of its X86 server business.
IBM clearly will continue on the path to get out of most if not all things hardware, just as it has done in selling Lenovo its Raleigh-based PC business and its point-of-sale group (also based in Raleigh) to Toshiba.
“The division reported sales of $3.11 billion in the first quarter, down from $3.75 billion a year earlier, as the company struggled to distinguish its products, such as servers, in a market that increasingly views them as commodity products,” Bloomberg reported.
Analysts jumped on the IBM earnings report as signs of big trouble even though lack of execution by the sales force in getting some deals closed was a major reason.
Oddly, just before the earnings report IBM received a lot of praise and an upgrade in its stock price from UBS.
But that report noted it is IBM’s commitment to “cloud computing” and software services as the crucial drivers for Big Blue’s future.
All the turmoil now taking place at IBM can’t be pegged to one bad quarter, especially since IBM stock has recently been at all-time highs and Warren Buffett sings the company’s praises. Maybe deep inside Big Blue’s management the alarm bells are ringing louder than ever.
The “Roadmap” plan to deliver $20 in earnings per share plan embraced by Rometty may be in trouble.
So the rebalancing is likely to be fast, and furious – just as a new Vin Diesel movie hits a movie screen near you.
[IBM ARCHIVE: Check out more than a decade of IBM stories as reported in WRAL Tech Wire.]