ROCHESTER, Minn./ARMONK, N.Y. (KTTC) -- Global computer giant IBM is imposing one-week furloughs at one-third pay for employees of its hardware unit in late August in an effort to trim costs.
Some employees in Rochester are trying their best to shrug it off, but were clearly dismayed at the loss of income that came out of the blue.
"It's tough, but at least I still have a job," said one long-time IBMer, reflecting on the big picture.
The cost-cutting move will impact thousands of IBM employees across North America in the Systems and Technology Group (STG), possibly hundreds of these working at the IBM Main Campus in northwest Rochester.
"A majority of STG and ISC (Integrated Supply Chain) employees who support STG -- in the U.S. -- including STG and ISC executives -- will take a mandatory week off beginning either August 24 or August 31," said Jay Cadmus, an IBM STG spokesman. "Affected employees will receive the equivalent of one-third pay. Executives will not be paid for that week."
IBM is facing a slowdown in business demand for servers and other hardware produced by the STG side of its business. Cadmus said the one-week furloughs were settled upon as the best option and that "this approach best balances the interests of employees and the competitiveness of the STG business."
IBM's second quarter earnings report has its share of challenging numbers; net income for the period was off 17 percent from a year earlier, but total revenues of $24.9 billion were only down 3 percent compared to the second quarter of 2012. And that's with Big Blue taking a billion dollars as a "workforce rebalancing charge." The CEO gave the global view of things.
"Going forward, we will continue investing in our strategic growth initiatives, acquiring and divesting capabilities, re-balancing skills and taking action in the areas that are not performing," said Ginni Rometty, IBM chairman, president and chief executive officer, in the Q2 statement.
As part of the "workforce rebalancing" still underway, computer manufacturing is being shifted from Rochester to Guadalajara City, Mexico, but it's still a work-in-progress.
"We have only done test orders in Guadalajara up to this point, actual production orders of basic systems are scheduled to begin around September," said one IBM worker from Rochester involved in the move to Mexico. "More complex models will be added progressively over the next year+ until they are doing the entire workload that Rochester would normally have done. The interesting thing is that now they are trying to accelerate that schedule."
Rometty indicated back in mid-July that the company remained optimistic of hitting its original 2013 financial objectives, but clearly, executives have decided that to do that some extraordinary steps had to be taken in the STG unit in order for that to happen.
Using IBM's own analysis from Q2 sales in the hardware division, revenues from Power Systems were off 25 percent compared with the 2012 period. Revenues from System x were down 11 percent, but System z mainframe server products were up 10 percent. And as IBM notes: "Total delivery of System z computing power, as measured in MIPS (millions of instructions per second), increased 23 percent."
As the Minnesota summer winds its way toward Labor Day, many of the people working in IBM's hardware units will be out enjoying the sunshine as the computer giant works to balance its costs and revenues in its complex global business. But the furloughs have again served as a reminder that with offices and operating units in 170 countries, IBM's far-flung empire is anything but the stable career destination it once was.
"I tell you what, if I was giving advice to a young person starting his or her career, and it was a choice of IBM or a different company, I would probably advise going with the other company based on what I have seen the past few years," said one career IBM employee in Rochester.
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