Clearday-TRForce
05-06-2005, 03:26 PM
Eric Auchard
SAN FRANCISCO - *******
IBM said it would cut up to 13,000 jobs, or 4 percent of its work force, as part of a cost-cutting move targeting Europe that will lead to a pretax charge of up to $1.7 billion.
The world's largest computer company said late on Wednesday it would cut bureaucracy and scale back in slower-growth countries, using global teams instead of single-company operations to deliver some services.
IBM shares rose more than 1 percent in after-hours trading to $78.00, up 92 cents from their regular session closing price.
International Business Machines Corp. said it expected to take a charge against second-quarter earnings between $1.3 billion and $1.7 billion to cover costs of the reduction.
The company said it plans to cut between 10,000 and 13,000 jobs starting in the second quarter, representing roughly 3 percent to 4 percent of the work force at the end of 2004.
Last month, IBM warned that job cuts were coming following a bombshell earnings shortfall, which it blamed on disappointing profits and sales in Japan, Germany, France and Italy, as well as its inability to close deals near the end of the quarter.
The job cuts were a sign that IBM is trying to solve its own troubles, not a symptom of a wider slowdown in the tech sector, said Mark Herskovitz, manager of Dreyfus' Premier Technology Growth fund, which manages $2 billion in assets.
The reductions, while substantial, are a far cry from the scale of job-cutting IBM underwent in the late 1980s and early 1990s, when the company faced a crisis in its core mainframe computer business and cut its work force by more than half.
From a peak of 405,000 employees in 1985, the company's work force bottomed at 219,000 in 1994, in repeated rounds of layoffs that devastated the economy of the Hudson River valley where many of IBM's operations were once concentrated.
IBM, based in Armonk, New York, employed 329,000 staff worldwide in December, the last time the company disclosed its total work-force figures. About 100,000 of those jobs were located in its European region.
On Sunday, IBM completed the sale of its PC business to Lenovo Group Ltd. of China resulting in the transfer of another 10,000 IBM PC employees to Lenovo's payroll.
Voluntary cuts:
IBM spokesman John Bukovinsky said that most of the job cuts in Europe would be voluntary and that talks had begun with workers' councils and other organizations on the timing of these actions.
"In Europe, we expect to reach most of the objectives through voluntary programs," Bukovinsky told *******.
But Herskovitz questioned the company's ability to hit the goal. "I don't know how they are going to get 10,000 people to quit," he said.
IBM said it seeks to reduce bureaucracy and scale back operations in lower-growth countries, creating more cross-border teams to deliver products and services globally.
This will allow the company to eliminate what it described as a traditional layer of pan-European management.
Bob Moffat, IBM's senior vice president of supply chain integration, declined to specify which countries or office locations were targeted for cutbacks but said they would be concentrated in Europe.
In a phone interview, Moffat said the latest moves were part of a three-year push to shift IBM employees into high-growth businesses while consolidating redundant back-office operations in each country where IBM operates.
"Are we rebalancing resources into higher-growth markets?" Moffat, the executive in charge of the restructuring, asked. "Absolutely. As any business would so do."
Moffat, the former head of IBM's PC business, said the company is seeking to create global operations centers for a variety of functions that have previously been handled on only a country-by-country or pan-European basis.
Some sales functions in slow-growing markets in Germany and Italy might be concentrated in a particular office in one of those countries, while other work would be shifted to lower-cost countries, in Eastern Europe, for example, he said.
regards.
SAN FRANCISCO - *******
IBM said it would cut up to 13,000 jobs, or 4 percent of its work force, as part of a cost-cutting move targeting Europe that will lead to a pretax charge of up to $1.7 billion.
The world's largest computer company said late on Wednesday it would cut bureaucracy and scale back in slower-growth countries, using global teams instead of single-company operations to deliver some services.
IBM shares rose more than 1 percent in after-hours trading to $78.00, up 92 cents from their regular session closing price.
International Business Machines Corp. said it expected to take a charge against second-quarter earnings between $1.3 billion and $1.7 billion to cover costs of the reduction.
The company said it plans to cut between 10,000 and 13,000 jobs starting in the second quarter, representing roughly 3 percent to 4 percent of the work force at the end of 2004.
Last month, IBM warned that job cuts were coming following a bombshell earnings shortfall, which it blamed on disappointing profits and sales in Japan, Germany, France and Italy, as well as its inability to close deals near the end of the quarter.
The job cuts were a sign that IBM is trying to solve its own troubles, not a symptom of a wider slowdown in the tech sector, said Mark Herskovitz, manager of Dreyfus' Premier Technology Growth fund, which manages $2 billion in assets.
The reductions, while substantial, are a far cry from the scale of job-cutting IBM underwent in the late 1980s and early 1990s, when the company faced a crisis in its core mainframe computer business and cut its work force by more than half.
From a peak of 405,000 employees in 1985, the company's work force bottomed at 219,000 in 1994, in repeated rounds of layoffs that devastated the economy of the Hudson River valley where many of IBM's operations were once concentrated.
IBM, based in Armonk, New York, employed 329,000 staff worldwide in December, the last time the company disclosed its total work-force figures. About 100,000 of those jobs were located in its European region.
On Sunday, IBM completed the sale of its PC business to Lenovo Group Ltd. of China resulting in the transfer of another 10,000 IBM PC employees to Lenovo's payroll.
Voluntary cuts:
IBM spokesman John Bukovinsky said that most of the job cuts in Europe would be voluntary and that talks had begun with workers' councils and other organizations on the timing of these actions.
"In Europe, we expect to reach most of the objectives through voluntary programs," Bukovinsky told *******.
But Herskovitz questioned the company's ability to hit the goal. "I don't know how they are going to get 10,000 people to quit," he said.
IBM said it seeks to reduce bureaucracy and scale back operations in lower-growth countries, creating more cross-border teams to deliver products and services globally.
This will allow the company to eliminate what it described as a traditional layer of pan-European management.
Bob Moffat, IBM's senior vice president of supply chain integration, declined to specify which countries or office locations were targeted for cutbacks but said they would be concentrated in Europe.
In a phone interview, Moffat said the latest moves were part of a three-year push to shift IBM employees into high-growth businesses while consolidating redundant back-office operations in each country where IBM operates.
"Are we rebalancing resources into higher-growth markets?" Moffat, the executive in charge of the restructuring, asked. "Absolutely. As any business would so do."
Moffat, the former head of IBM's PC business, said the company is seeking to create global operations centers for a variety of functions that have previously been handled on only a country-by-country or pan-European basis.
Some sales functions in slow-growing markets in Germany and Italy might be concentrated in a particular office in one of those countries, while other work would be shifted to lower-cost countries, in Eastern Europe, for example, he said.
regards.