The only way is up, baby: IBM UK sales down, profit down, headcount down

IBM UK split with more than 1,000 employees in 2017 but the reduction in overheads only went so far: the bottom line was bashed mostly by an impairment of investment charge and falling services sales.

For the calendar year (PDF), Big Blue pulled in £3.713bn in revenues, down 4.76 per cent on the prior 12 months. Broken by segment, hardware grew from £117.5m to £137.4m and software was up almost 4 per cent to £651.3m.

It was services, which comprises Global Business Services (consultancy, app development and migration) and Global Technology Services (managed, maintenance, cloud), that really deflated sales.

Services delivered to UK customers fell to £1.405bn for the year versus £1.556.2bn. Even exports – services, including R&D, to fellow subsidiaries in the group – were down 4.9 per cent to £759.7m.

IBM didn't explain why the three units performed the way they did, but at group level, IBM has sold a bigger volume of meatier servers, there is growing interest in security and analytics, and fewer customers are signing off on all-encompassing outsourcing agreements.

To combat the shifting sands in its traditional services businesses, IBM has systematically laid off thousands of workers globally in the past five or so years, and as we revealed on multiple occasions last year. The UK was not spared this process.

Staff headcount fell to 12,124 from 13,212 in the prior year. Services and marketing personnel dropped 818 to 9,993 and product development peeps dropped from 2,401 to 2,131. Staff costs fell to £1,156.7bn from £1,296.6bn.

After accounting for expenses, finance income, finance costs, an impairment of investments for numerous businesses bought over the years, and income from investments, IBM reported a net profit of £49.8m, down from £61.2m.

In the year, there was a hefty reduction in the retirement benefit balance - from a net pension asset of £797.7m to a net pension liability of £33.7m. This "resulted from a reassessment of a previous judgement to recognise the accounting surplus as an asset", the accounts stated.

Basically, back in 2009, Big Blue initiated legal proceedings in front a High Court beak in London to seek a declaration that it acted within the law in telling trustees of the IBM United Kingdom Pension Plans that it was closing the defined pension pot to further accruals for most participants, and putting in place a new policy.

Fast-forward to 2014, a High Court judge ruled that IBM's pension changes were within its own discretion but said the company had breached its implied duty of good faith in the implementation and consultation with staff. Jump to August 2017 and the Appeals Court reversed that ruling in a final decision.

Members of the pension scheme brought 285 individual actions against Big Blue, alleging constructive dismissal and age discrimination. The Register understands that some of the cases have concluded at an Employment Tribunal in Southampton. ®