February 05, 2015
Getting Chromed, and Bad Calls
The HP 3000 made its bones against IBM's business computers, and the wires are alive this week with the fortunes of Big Blue circa 2015. Starting with meetings yesterday, the company is conducting a Resource Action, its euphemism for layoffs. IBM employees call these RAs, but this year's edition is so special -- and perhaps so deep -- it's got a project name. The cutting is dubbed Project Chrome, and so the IBM'ers call getting laid off Getting Chromed.
Hewlett-Packard has never wanted to call its layoffs by their real name either. The first major HP layoff action during the 3000's watch came in the fall of 1989, when more than 800 of these separations were called "being excessed." Employees had four months to find a new place inside HP, but had to search on their own time. Engineers and support staff were given the option to remain at the company, but jobs at plant guard shacks were among their new career options. Another virulent strain of HP pink slips came in the middle of the last decade, one of the purges in pursuit of better Earnings Per Share that pared away much of the remaining MPE/iX expertise from the vendor.
Aside from bad quarterly reports, these unemployment actions sometimes come in the aftermath of ill-fated corporate acquisitions. This week on CNBC's Squawk Box, analysts identified HP's Compaq merger as one of the worst calls of all time. The subject surfaced after the questionable call that led to a Seattle defeat in Sunday's SuperBowl. A big company's failures in new markets can also be to blame for getting Chromed. IBM has seen its revenues and profits fall over the last year, while mobile and cloud competitors have out-maneuvered Big Blue.
IBM has already shucked off the Cognos development tool PowerHouse as of early last year, but now comes word that other non-IBM software is getting its support pared back in the RA. In the IEEE's digital edition of Spectrum, one commenter made a case for how IBM is sorting out what's getting Chromed.
The digital article on the IEEE website also includes some reports that employees over 40 have been targeted. They then saw the company threaten to withhold severance packages if age-discrimination lawsuits were filed.
I am the last US resource supporting a non-IBM software package, which is in high demand globally -- yet the powers that be seem oblivious to it. Rather than create a dedicated group to go after that business, they cut anyone with that skill, since it is not an IBM product and therefore, "not strategic." Unfortunately the company continues to gamble on their Tivoli products, which clients seem to embrace about as much as Lotus Notes, rabies and bird flu.
HP and IBM have a lot in common in their workforce makeup. Both employ more than 300,000 workers as of last year, and while those numbers lead the industry, neither is among the top 15 employers worldwide in headcount. However, HP and IBM manufacture goods, so they look up at the largest manufacturing worker employer, Volkwagen. There are 555,000 VW employees.
HP's employee count rose into six digits, and then doubled again, as a result of two acquisitions. Compaq drove the headcount to above 140,000, a 65 percent increase. Then in 2008, EDS became an HP operation, and the headcount soared to 349,000. Since 2011, the workforce at the vendor that's still working to sell some HP 3000 replacements has dropped by 15 percent. The current HP layoff plan — a layoff strategy has been in place for more than five year — calls for a total of 55,000 job eliminations by the end of this fiscal year.
These employee cuts are the result of relentless pursuit of EPS growth, so that the numbers reported to shareholders can show an increase in spite of flat to falling revenues. Stock prices at HP have recovered to 2005 levels amid the HP layoff march. But IBM's share price took a 12 percent dive on a single day this fall, is now below its mark when current CEO Ginni Rommety took over, and hovers today around $160 a share.
Rommety was rewarded for her performance in 2014 with a $1.6 million bonus. The tepid stock of IBM made it "the worst performer in the Dow Jones Industrial Average for a second straight year," according to Bloomberg News. The company that once proudly wore the reputation "nobody ever got fired for buying IBM" is doing a lot of firing this week.
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