Consulting unit cost Big Blue big bucks

The price IBM paid for PricewaterhouseCoopers' consulting business is hundreds of millions of dollars more than the $3.5 billion estimated last year.

Ed Frauenheim Former Staff Writer, News
Ed Frauenheim covers employment trends, specializing in outsourcing, training and pay issues.
Ed Frauenheim
2 min read
The price IBM paid for PricewaterhouseCoopers' consulting business has gone up by hundreds of millions of dollars.

In a U.S. Securities and Exchange Commission filing last week, Big Blue said it paid PricewaterhouseCoopers $397 million in July. This was on top of the $3.5 billion price it paid last year. The additional payment stems partly from a review of assets transferred to IBM in the deal, according to the filing.

IBM spokesman Joe Stunkard could not provide additional details about the assets in question Tuesday. But Stunkard defended the overall deal, despite its steeper price tag. Owning the PricewaterhouseCoopers unit lets Big Blue offer higher-end consulting services, he said.

"The acquisition of (the) consulting business was a strategic move that's going to help us in the near term and in the long term," Stunkard said.

IBM's services wing has seen its revenue climb in the wake of the acquisition. For example, in the fourth quarter of 2002, revenue from IBM's global services unit rose 17 percent year over year, to $10.6 billion. The services unit now has roughly 180,000 employees, Stunkard said.

IBM's recent filing also provided details about layoffs the company began last year. IBM said it cut 1,400 workers from its Microelectronics division and 14,213 workers from its services wing.

"These actions took place last year," Stunkard said. The primary reason for the job cuts was a decline in corporate spending on technology-related services, the company said. IBM's filing said all the affected workers had left the company as of June 30.

IBM has continued to trim its workforce this year. Amid continued sluggishness in its chipmaking business, IBM has cut more than 600 jobs. About 500 of the jobs being eliminated are at a plant near Burlington, Vt., with the rest scattered among the company's other IBM Microelectronics facilities in the United States, the company said Monday.

Overall, IBM has about 316,000 employees, Stunkard said.