Welcome to 2016 predictions week!
Readers love predictions so for 15 years or so I’ve been making lots of them during the first full week of each new year. The first time I did a predictions column it was because I couldn’t think of anything else to write about that day and the reaction from readers was so strong that I’ve been stuck doing them ever since. What started as one column per year filled with about 10 predictions has expanded over time to as many as 10 separate predictions columns because as I age I am becoming ever more long-winded. Sorry. It’s reached the point this year where this introductory column won’t even contain predictions, just a guide to the several columns that will follow in the next few days.
They will begin, of course, with a look back at my predictions from a year ago to see how smart or stupid I was. Historically I’ve been about 70 percent smart and 30 percent stupid in my predictions with that number more or less dependent on how vague I can be. Sorry again.
You may have noticed I’ve been away. I was helping to launch Mineserver, my kids’ startup. That painful birth should be complete by the end of this week. Next week -- after I’ve recovered from the predictions debacle -- I’ll write a special column all about what it’s like for a guy who last shipped a technology product in 1986 to do a tech startup with co-founders whose median age is 11. To call it a challenge would be an understatement, but I think we will one day look back fondly on the experience.
My first predictions column will appear later tonight (Monday) and they will all be done by the end of Friday. There’s a vague possibility I’ll also do a column Friday about IBM, which is supposed to start its first 2016 layoffs this Thursday. That column will only appear if I feel there’s something unsaid or not obvious about the situation that needs to be pointed out at that time.
It’s not at all clear that IBM will announce anything on Thursday but I have it on good authority that about 10 percent of Big Blue’s worldwide headcount (about 30,000 people in all) will be let go early in 2016, whether they issue a press release to that effect or not.
Lord knows how they’ll decide who to let go. To do such a large layoff so early in the year means it probably can’t be based on year-end numbers. Maybe they use a ouija board.
I’m told that in the USA, IBM workers were asked to get their performance information (used for promotions and raises) in early for 2015 -- 2 months earlier than normal. That was a big tipoff that something was going to hit the fan in January. To the best of my knowledge IBM hasn’t given any USA workers their ratings for 2015 yet. so this job action is being decided independent of the facts.
The fourth quarter of calendar 2015 was a debacle for IBM and it’s clear from the outside looking-in that the company won’t be shying away from that description. Managers are being told to put employees who haven’t performed on performance improvement plans (PIPs) immediately. A manager on the conference call asked for the definition of "haven’t performed" and it’s strictly based on how much they sold (even for technical sellers, who have a support role!). So you have technical and sales people working their asses off trying to sell stuff that nobody wants to buy, and being rated a PBC 4 and put on a PIP just because the company hasn’t invested in improving their products.
The ship is going down. There are usually panicked calls trying to get something to happen by end of the quarter, but this time there hasn’t been much of that. The sales pipeline is pretty empty of big deals that might have had a chance to change quarterly results. And registration for the big annual Interconnect (former Impact) conference is extremely low (about 15 percent) and it’s next month. They are resorting to giving away passes to save face.
Sometimes public companies like to pack all the bad news together to either just get it out of the way at once or to justify some draconian measure. In this case with IBM I suspect both motivations are there. If the news is big and bad enough Ginni Rometty can use it to justify some significant restructuring beyond just whittling the headcount. I suspect she wants to sell or close entirely Global Services, taking a big earnings hit in the process while leaving many customers turning slowly in the wind. Certainly something has to give: with interest rates rising IBM may not be able to afford much longer borrowing money to buy back stock and shrink the company.
Everyone I know who is still working at IBM is hoping for a separation package, their fear being that the era of packages may be ending or has already ended at IBM. Morale is at rock bottom.
There is a very clear and predictable pattern here. The quarter ends. IBM calculates its numbers. It then recalculates its forward-looking numbers. It sizes and implements staff reductions accordingly. It announces quarterly earnings, updates its forward looking numbers, then announces cost reduction plans and write offs.
Since the whole idea is to save money and the most expensive IBM workers are in the USA, they will be hit extra hard.