IBM TO AXE 13,000 JOBS WORLDWIDE
IBM TO AXE 13,000 JOBS WORLDWIDE
2005-05-06 at 10:36:00 am #9203IBM to axe 13,000 jobs worldwideComputer giant IBM will cut 13,000 jobs worldwide, or about 4%
of its total workforce, as part of a restructuring aimed at boosting profits.
Most of the job losses will be at IBM’s European operations as the firm looks
to focus on high-growth markets.
IBM, the world’s biggest computer company, said the plans would cost between
$1.3bn (£684m) and $1.7bn.
The company employs 100,000 staff in Europe, with about 25,000 of those
working in the United Kingdom.
‘Fear the worst’
IBM said that the redundancies would mean cost savings of between $300m and
$500m in the second half of this year.
That figure should triple in 2006, the company said.
I don’t know how they are going
to get 10,000 people to quit
IBM’s chief financial officer Mark Loughridge said the west European market
was performing poorly so jobs would be lost in the UK, Germany, France and
He gave no figures on how many jobs would be lost in each country.
Answering questions after a conference call with analysts, he said the job
cuts were new, and not “bundled” together parts of an ongoing restructuring.
A spokesman for the UK workers’ union Amicus called the move a “slash and
burn” reaction to poor results.
“We fear the worst, given that it is quicker, cheaper and easier to get rid
of workers in the UK than elsewhere in Europe,” the spokesman said.
The news comes just weeks after IBM reported worse-than-expected earnings in
the first quarter.
The New York-based firm blamed a failure to close business deals and slow
economic growth in key European markets.
The world’s biggest computer maker surprised markets when it said net profit
for the three months to 31 March were $1.4bn (£745m) from £1.36bn a year
earlier, while sales were $22.9bn, less than analyst forecasts of $23bn.
IBM will create a number of
smaller, more flexible local operating units in Europe to increase direct client
As the results were revealed Mr Loughridge warned that a “sizable
restructuring” would be undertaken.
Analysts said that the threat of job losses had hit performance and according
to Goldman Sachs analyst Laura Conigliaro, “European sales seemed particularly
disrupted as rumours flared in the final weeks of the quarter”.
Ending the uncertainty, IBM said it now plans to realign its operations and
organisational structure in Europe to reduce bureaucracy in lower-growth
That move should eliminate “the need for a traditional pan-European
management layer to coordinate activity”, it said.
“IBM will create a number of smaller, more flexible local operating units in
Europe to increase direct client contact,” it added in a statement.
Most of the redundancies in Europe will be voluntary and talks have already
begun with unions and worker councils over the timing of the job cuts in Europe,
company spokesman John Bukovinsky said.
Analysts questioned whether the company would be able to trim its workforce
without resorting to forced redundancies.
“I don’t know how they are going to get 10,000 people to quit,” said Mark
Herskovitz, a fund manager at Dreyfus.
Mr Herskovitz said that IBM’s problems were not linked to a wider slowdown in
the global technology industry.
The company already has taken steps to streamline its operations and has sold
its personal computer division to China’s Lenovo for $1.75bn.
IBM has been trying to find its correct staffing level for years, and its
worker numbers have fluctuated since the late 1980s.
Employee numbers peaked at 405,000 in 1985, before hitting a low of 219,000
IBM had 329,000 staff worldwide as of December last year.