Recently, according to foreign media reports, IBM will carry out a new round of layoffs, the proportion of layoffs is about 0.5% of the total number, about 1700 people. Compared with the total staff of nearly 350,000, the number of layoffs is not high, but it is worth noting that IBM is in a new stage of business development adjustment, this layoffs may be the prelude to IBMs transformation.
For IBM, its financial statements have been poor in recent years. Revenue and profit have declined year-on-year. Business has been hampered. Especially, cloud services, which IBM has high expectations, lag far behind the giants such as Amazon. After the acquisition of Red Hat at a high cost, it seems imperative to cut staff in order to avoid overstaffing.
Since 2019, Chinese and foreign technology Internet companies have been losing jobs. Beijing East, American League, Drop Drop and Tencent have all carried out a round of layoffs. Other companies also have various talent optimization plans. After overseas Oracle laid off workers in China, another round of layoffs took place in the United States. The initiatives of major companies not only mark the advent of the cold winter of the Internet, but also more likely mark the passing of the best era of technology companies after nearly two decades of development of the Internet.
IBM made two layoffs in 2016 and 2017, and in April this year, IBM closed its manufacturing plant directly in Tampini, Singapore. According to relevant media reports, IBMs plant in Tampini, Singapore, has 400 to 600 employees. IBM has made three rounds of layoffs, with about 200 layoffs per round. In this way, IBM has laid off at least 1,000 employees in Singapore. In May, IBM announced another 500 layoffs.
There is nothing wrong with the companys layoffs for its own development, but many problems easily arise in the process of layoffs. According to foreign media reports, IBM once forced employees over 40 to resign, so the laid-off employees sued IBM collectively. According to the ProPublica report, IBM has laid off at least 20,000 employees over the past six years, all over the age of 40.
In addition to age discrimination, IBM still has many problems in the recruitment process, such as racial discrimination. Although layoffs are justifiable, how to lay off workers is a technical job. If such discrimination exists, IBM may bear a large loss in future court proceedings.
Oracle has offered salary subsidies to laid-off workers in China. In Singapore, IBM has cooperated with the local Singapore Labor Development Bureau, Employment and Functional Training Center and the National Federation of Staff and Workers to assist the laid-off employees. This is a better way to deal with both sides. IBM may also adopt this kind of assistance in the latest round of layoffs, which will help IBM tide over the layoffs smoothly.
The layoffs are a harbinger of the companys financial problems and a sign of the companys imminent transformation. For IBM, although the current financial performance is still acceptable, revenue and profits have shown a downward trend. It is particularly important for IBM to find new growth points. At present, IBM is committed to developing cloud services, as can be seen from the acquisition of Red Hat. Therefore, for IBM, personnel optimization may be a necessary condition for transformation.
(1) Revenue and profit declined year-on-year, and layoffs were implemented to reduce operating costs.
Recently, IBM released its first quarter results for fiscal year 2009, which showed that IBMs revenue in the first quarter was $18.18 billion, down 5% from $19.07 billion in the same period last year, and below analystsexpectations of $18.46 billion. Net profit was $1.59 billion, up 5% from $1.68 billion in the same period last year. So far, IBMs revenue has fallen for three consecutive quarters.
From the financial data of past years, IBM achieved revenue of 79.139 billion US dollars in 2017, 39.8 billion US dollars in 2018, and nearly halved its revenue. In terms of debt, IBM had a debt of $45.8 billion by the end of 2018, which means that IBM could generate at least $20 billion in additional debt.
IBM is still profitable, but its financial position is not optimistic. IBMs revenue from cloud services, which it attaches great importance to, is also not ideal. The results show that the global technology services sector, including infrastructure and cloud computing services, as well as technical support services, has revenue of $6.88 billion, down 7% from the same period last year.
Although layoffs cannot reverse IBMs current financial situation, they are helpful in reducing operating costs, with sales and management costs reaching $4691 million in the first quarter of fiscal year 2019. Although the proportion of layoffs is small, it can help IBM to reduce expenditure and optimize future financial performance.
(2) IBM is committed to the development of cloud services, and the transformation puts forward new requirements for talent optimization.
IBM is hiring as well as laying off staff. At present, 7705 vacancies are listed on the companys recruitment page. The downsizing may be closer to talent optimization for IBM. According to Observer. com, a spokesman for IBM said in an e-mail to CNBC: We will continue to adjust our team to focus on high-value parts of the IT market. At the same time, we will continue to actively recruit employees in key frontier areas that contribute value to customers and IBM itself.
Recently, IBMs cloud service development has been hampered. Data show that Amazon AWS has the largest market share in the world, accounting for about 31.7% of the cloud service market today. Microsoft Azure, Google Cloud and Aliyun followed closely, with market share of 16.8%, 8.5% and 4%, respectively. IBM, by contrast, appears to be lagging far behind. Moreover, IBMs cloud market share has dropped from 4.7% in 2017 to 3.8% in 2018.
But the future market for cloud services still needs to be developed. According to Gartner, the global public cloud service market will grow by 17.5% in 2019 to $214.3 billion, up from $182.4 billion in 2018. According to Sid Nag, vice president of Gartner Research, Gartner expects the growth rate of cloud services industry to be three times that of IT services as a whole by 2022.
IBM obviously does not want to abandon the huge cloud service market, and this talent optimization may be a sign that IBM is re-entering the cloud service market. But in order to compete with Amazon, Microsoft and other giants, talent optimization is necessary. Perhaps this is why IBM is cutting staff and recruiting at the same time.
(3) IBM buys Red Hat to avoid overstaffing and layoffs
IBM is about to complete its biggest acquisition since its inception. According to foreign media reports, the European Commission, the EU antitrust regulator, will decide by June 27 whether to approve the US technology giant IBMs purchase of software company Red Hat for $34 billion. Once the acquisition is successful, IBM will expand and upgrade its business in software subscription services and cloud services.
But for IBM, after the successful acquisition, Red Hat staff will inevitably enter IBM, even as an independent department, the total number of IBM staff will rise sharply. Perhaps IBMs recent layoffs are aimed at better personnel integration after the acquisition of Red Hat, which, after all, overlaps with some of IBMs departmental functions and will inevitably merge executive departments. When the acquisition is over, IBM may have another round of small-scale layoffs to better integrate its staff.
In recent years, the development of technology companies is gradually slowing down, and the development of the Internet has approached the bottleneck. From the analysis of IBM, we can see that its revenue and profit are declining year on year. Its not just IBM, other companies are facing the same dilemma.
After decades of development, the Internet dividend has disappeared. Although the rise of mobile terminals has revitalized technology Internet companies, with the saturation of mobile terminals, technology giants in the past may face the biggest challenges ever. From the financial data point of view, many technology Internet companies are still growing, but the growth rate is slowing down, revenue and profits are gradually decreasing.
IBM has been transforming in recent years and has recently focused on cloud services. Other giant companies, such as Apple, have also begun to transform. In recent years, Apple has slowly begun to shift from hardware device manufacturers to software service providers. From the spring conference in 2009, it may be seen that Apples main business will gradually transition to subscription services. Mobile phones and other devices will become subscription services tools. So will Microsoft, which is gradually turning to monthly services. But it has to be admitted that IBMs transformation has not been so successful, as can be seen from its recent series of layoffs. Big companies like Apple and Microsoft may also face the problem of successful transformation.
With the development of science and technology, peoples hardware equipment is gradually decreasing, which is not a good thing for technology companies. This indirectly caused the decline of hardware equipment manufacturing companies, including Apple. Although wearable equipment is gradually rising, it is still difficult to support the development of enterprises at present.
Many analysts believe that the current valuation of technology Internet companies is too high. In fact, there may be some unreasonableness in the current valuation. After all, the cost of customer acquisition and traffic is rising. The business model relying on a large number of users will face challenges in the future. With the rising cost and the narrowing of revenue, the revenue and profit of technology companies will further decline. Perhaps the best era for technology Internet companies has passed. Now. To sum up, IBMs downsizing is the result of its own financial situation and transformation. Although IBMs development is not smooth at present, with the completion of future transformation, IBM may usher in new growth, after all, the cloud service market is vast. However, from Amazon, Microsofts competition can not be ignored. In this era, the growth of technology companies is encountering bottlenecks. IBM wants to achieve greater development in the future, depending on the performance after the acquisition.
Many analysts believe that the current valuation of technology Internet companies is too high. In fact, there may be some unreasonableness in the current valuation. After all, the cost of customer acquisition and traffic is rising. The business model relying on a large number of users will face challenges in the future. With the rising cost and the narrowing of revenue, the revenue and profit of technology companies will further decline. Perhaps the best era for technology Internet companies has passed. Now.
To sum up, IBMs downsizing is the result of its own financial situation and transformation. Although IBMs development is not smooth at present, with the completion of future transformation, IBM may usher in new growth, after all, the cloud service market is vast. However, from Amazon, Microsofts competition can not be ignored. In this era, the growth of technology companies is encountering bottlenecks. IBM wants to achieve greater development in the future, depending on the performance after the acquisition.