Tech Industry

Are job cuts ahead at IBM?

Big Blue is likely to implement layoffs as soon as this month and may also trim unprofitable businesses as a way to cut costs, analysts say.

IBM is likely to implement layoffs as soon as this month and may also trim unprofitable businesses as a way to cut costs, analysts say.

IBM is "going to have some layoffs," in the near term, said Gary Helmig, analyst with Soundview Technology Group.

Helmig said he expects the layoffs will be "more than a couple thousand...but less than 16,000," or 10 percent of IBM's U.S. work force, based on his company sources and observations.

Reuters reported on Friday that the cuts would be in the range of 2.5 percent to 3 percent of IBM's 320,000-member work force, according to a source close to the situation.

Other analysts said they hadn't heard about layoffs, but added that they would not be surprised by a reduction in the company's work force based on its current situation and the state of the overall market.

Word of the potential layoffs follows an across-the-board slowdown in business during the company's first quarter. The slowdown hurt sales of most of IBM's main products--everything from servers to services--and caused analysts to revise their IBM earnings outlooks for the rest of the year. IBM did meet lowered expectations for the quarter, but the company gave little in the way of estimates for the rest of the year.

IBM CEO Sam Palmisano also warned employees in a speech in April of slower-than-expected growth in the technology industry and at IBM. Palmisano is also said to have suggested during the speech that further reductions in staff were possible. IBM confirms the speech was made, but will not discuss what was said.

Layoffs are likely to come from across the board and include "some cuts in servers...and microelectronics," Helmig said. "There will be more cuts in the PC area, I'm sure."

IBM is serious about cutting costs and therefore will also likely eliminate businesses that are not profitable, he said. It has already moved to eliminate its disk drive operations, for example. Moves such as this also reduce employee head count.

"It's a good thing, and it's a continuation of what they've been doing for the last (few) years," he said.

Helmig said he has already added a $340 million restructuring charge to the forecast model for the company's earnings for the year. Last year, IBM took a $293 million charge, he said.

Analysts were backed up by a report on the Web site F*** Thursday. The site, which covers everything from layoffs at dot-com companies to large tech firms like 3Com, said IBM will lay off as much as 10 percent of its employees in the United States as soon as May 23.

Though the job cuts are expected to be broad, a disproportionate amount could come from the company's Global Services unit, the site said.

Global Services employs about 150,000 people.

Despite the 2001 technology market slowdown, which saw massive layoffs at a number of tech companies, IBM has held its head count fairly steady. Though it did lay off small numbers of employees in areas ranging from its PC operations to Global Services, its overall head count rose during the year.

However, sources say rumors of layoffs have been rampant among employees at many of the company's largest divisions, especially following Palmisano's speech.

IBM has about 320,000 employees worldwide, according to its 2001 annual report--about 3,500 more than it had in 2000. Global Services alone hired 14,000 people during the year.

Despite the rumors, IBM's job-search site listed 105 open positions at the company's various U.S. locations.

An IBM representative declined to comment.