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IBM and SGI announce layoffs

Corporate downsizing has hit the booming technology sector, with both IBM and Silicon Graphics announcing layoffs.

Corporate downsizing has hit the booming technology sector, with both IBM (IBM) and Silicon Graphics (SGI) announcing layoffs.

Late last month, there was a shake-up in Silicon Valley when SGI's CEO Edward McCracken announced that he would step down and that the company would lay off up to 1,000 employees in an effort to streamline operations, get spending under control, and return to profitability.

"There is a real sense of urgency to get back on the right track," McCracken said at the company's annual shareholder meeting, adding that SGI has been operating in a "tough, unforgiving environment."

McCracken said that the layoffs would affect all levels of employees, and joked that SGI was starting at the top--with himself.

Worldwide, 850 employees will be affected by the cutbacks, falling within the company's initial target of 700 to 1,000 layoffs. About 600 of those layoffs are regular employees, and the rest are contractors. Of the 600 regular employees, three-quarters work in the United States. John Thompson, a company spokesman, said the company is not breaking out which business units or geographic locations are being hit.

Workers being let go will receive 60 days notice and a severance package based on the length of their tenure at the company, a company spokesman said. Employees also will receive counseling and job-placement services. In addition, SGI will set up computers specifically allotted for online job searching, and will arrange networking opportunities for its former employees.

All those employees being affected in the United States are expected to be notified by the end of today.

Just two days before the restructuring announcement, the maker of graphics workstations reported its earnings. Including special charges, the company's net loss was $56 million, or 31 cents per share, compared with a net loss of $22 million, or 13 cents per share, in the first quarter of fiscal 1997.

IBM also chalked itself up on the board of corporate cutbacks, announcing that it will lay off hundreds of employees in its North American division as part of a major restructuring of the unit's sales and distribution organization, according to reports.

The restructuring, effective January 1, 1998, will consolidate sales and distribution between product and customer groups, eliminating the company's current geographic structure, the Wall Street Journal reported today in its electronic edition.

The layoffs come only weeks after IBM, in a cost-cutting move that ultimately could eliminate several thousand jobs, began offering employees a voluntary job buyout plan.

The move followed earlier announcements that it was reorganizing poorly performing divisions, such as its software and consumer PC divisions, while trying to expand the company's growing businesses, such as computer services.

For the September quarter, IBM reported earnings of $1.4 billion, or $1.38 per share, compared with earnings of $1.3 billion, or $1.23 per common share, during the third quarter of last year.

IBM officials could not be reached for further comment.

Reporter Lamia Abu-Haidar and Reuters contributed to this report.