IBM begins U.S. layoffs as part of global restructuring plan

  • Article by: BLOOMBERG NEWS
  • Updated: June 12, 2013 - 10:36 PM

Total cuts have been pegged at 6,000 to 8,000, less than 2 percent of giant’s workforce.

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International Business Machines Corp. (IBM), the world’s largest computer-services provider, began cutting U.S. jobs Wednesday as part of a global restructuring plan announced in April, according to several media reports.

The reduction targets employees with a range of seniority from rank-and-file staff to executives, a source told Bloomberg, who asked not to be named because the information is private. Some U.S. workers began to receive notifications of the cuts Tuesday night, according to Lee Conrad, a coordinator for Alliance@IBM, an employee group.

The restructuring will cost $1 billion worldwide, including severance expenses. IBM has declined to release any details about the layoffs.

“Change is constant in the technology industry and transformation is an essential feature of our business model,” IBM said in a statement.

“Consequently, some level of workforce remix is a constant requirement for our business. Given the competitive nature of our industry, we do not publicly discuss the details of staffing plans.”

The company is probably cutting 6,000 to 8,000 jobs globally, based on the $1 billion cost figure, said Laurence Balter, an analyst at Oracle Investment Research in Fox Island, Washington. That would represent less than 2 percent of IBM’s total workforce of 434,246 as of Dec. 31.

In Rochester, IBM is the second-largest private employer after the Mayo Clinic. As of 2009, the company’s Rochester plant had roughly 4,200 employees, although that number is believed to be significantly less because there have been layoffs since then. The 56-year-old facility has long been a major design center for the company.

IBM announced in March that the company planned to move most of the Rochester plant’s production work to Mexico and New York next year. The action reportedly cost about 200 jobs locally

Manufacturing of its Power Systems, PureSystems and PureFlex Systems servers would be moved to Guadalajara, Mexico, while refurbishing of used IBM machines would be moved to Poughkeepsie, N.Y. The company declined to say how many jobs in Rochester would be lost as a result.

In reference to layoffs this week, Alliance@IBM said on its website that 121 employees were cut from a unit within IBM’s Systems and Technology group, the hardware division that saw revenue drop 17 percent last quarter.

IBM announced the job-cutting effort after releasing disappointing first-quarter results in April. The Armonk, N.Y.-based company posted profit of $3 a share in the period, missing the $3.05 predicted by analysts — the first earnings shortfall since 2005, according to data compiled by Bloomberg. IBM said at the time that the job reduction would be concentrated overseas and mostly complete by the end of June.

The $1 billion plan represents an increase over IBM’s job-cut efforts in recent years. The company spent $803 million on workforce restructuring in 2012, up from $440 million in 2011.

IBM also has been cutting hours of its contract employees. CDI Corp., a Philadelphia-based provider of staffing and outsourcing services, told its staff working for IBM to limit their hours in May, according to a memo obtained by Bloomberg. IBM at the time said that the company relies on contractors to manage labor costs on information-technology projects for clients.

IBM shares fell 1.4 percent to $201.20 at the close in New York on Wednesday. The stock has climbed 5 percent this year, rebounding from a tumble in April following its lower-than-projected earnings.

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