IBM cuts 600 jobs in chip unit

In a cost-cutting move, Big Blue eliminates jobs in its Microelectronics unit, with most of the losses affecting at a plant in Vermont.

Ina Fried Former Staff writer, CNET News
During her years at CNET News, Ina Fried changed beats several times, changed genders once, and covered both of the Pirates of Silicon Valley.
Ina Fried
2 min read
Amid continued sluggishness in its chipmaking business, IBM has cut more than 600 jobs, with most of the losses affecting at a plant in Vermont.

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. In addition, Big Blue is requiring a number of employees in its chipmaking unit, including top executives, to take a week of unpaid leave.

"These moves are part of our effort to re-establish profitability," said Bill O'Leary, an IBM spokesman. "Obviously, we are trying to get revenue growing again. At the same time, you have to tackle the cost side of the equation."

In its quarterly earnings report last month, Armonk, N.Y.-based IBM blamed a $111 million loss in its Technology unit on problems in its chip business.

The moves are the latest in a series of cost-trimming efforts within IBM's chip business. Last year, the company cut 1,000 jobs in Vermont as part of a broader reorganization of its Microelectronics unit. The company has also cut jobs overseas and has already cut out overtime for workers that operate chipmaking machines.

This month, IBM said it was reassigning Michael Mayer, the general manager of its Microelectronics unit.

The latest job cuts in Vermont are being made among the engineering and support ranks rather than among employees who actually operate chipmaking equipment. All workers whose jobs are being cut have 60 days to find another post within IBM. If they do not, they will get extended medical and other benefits, along with two weeks' severance pay for each year of service, with a minimum of eight weeks' pay and a maximum of 26 weeks' pay.

O'Leary said IBM is making progress in improving output at its newest chipmaking plant, in East Fishkill, N.Y. During an earnings conference call in July, executives said the company had seen lower-than-expected yields from its new chipmaking operation, although O'Leary said those problems have been broadly resolved.

"I think we do have the yield issues largely under control and behind us," he said.

Earlier Monday, Apple Computer said it has started shipping its Power Mac G5 desktop, which uses chips made at the East Fishkill plant. Apple vice president Greg Joswiak said the company is pleased with the supply of G5 chips it is getting from IBM.

"Our stuff has actually been going rather well," Joswiak told CNET News.com. "They've been doing a great job supplying us with G5s."