Cuts look to steady declining revenues, as IBM continues to seek leadership in the cloud
IBM is set to announce the largest round of corporate layoffs in history, culling 26 percent of its worldwide staff, or more than 111,000 people, beginning as early as this week, according to a report.
The cuts are part of a reorganisation plan called “Project Chrome” that has been rumoured for several weeks, and which was triggered by a disappointing earnings announcement last week, according to Forbes.
IBM, which employs about 430,000 people worldwide. last week disclosed its 11th consecutive quarter of declining revenues, in spite of continued efforts to gain leadership in the emerging market for cloud-based technologies and services.
The staff affected are all to leave IBM by the end of January, according to Forbes. In the US, IBM reportedly plans to cut mainframe and storage staff, but the cuts will also affect international units, including services operations and contractors.
Currently, two-thirds of IBM’s revenues are derived from service contracts to help maintain on-site storage and data infrastructure, an area that is being eroded by the shift to remotely-based services.
Following the results, IBM chief executive Ginni Rometty said the company was making “progress” in its transition to “higher value” business with longer-term prospects. She made no mention of job cuts.
The report speculated that the cuts may be intended simply to improve the company’s balance sheet for the short term.
Project Chrome will also see staff shifted into new units in what is reported to be the biggest reorganisation in IBM’s history.
IBM also holds the record for what is currently the largest-ever jobs cull, for shedding 60,000 staff in one go in 1993. Microsoft last year cut 18,000 staff in the company’s largest-ever round of cuts.
IBM told Associated Press on Monday that it “flatly denies” the report, in a statement calling it a “ridiculous” rumour.
The company stated that it has recently taken a $600m charge for expenses related to workforce reduction, equating to several thousand people, a “small fraction” of what was reported.
The Forbes reporter, pseudonymous journalist Robert X. Cringely, said IBM was “dissembling”.
“What counts is how many fewer people will be paid by IBM on 1 March compared to today,” he wrote.
Ironically, IBM’s shares rose about 4 percent on the news, leading financial analysts to conclude that investors might welcome a dramatic move along the lines of what was reported.
Bernstein Research analyst AM Sacconaghi said in a research note that while massive layoffs would be “inconsistent” with IBM’s recent statements, “ironically,… we also see the potential for disappointment if a meaningful workforce action is not announced in the near-term”.
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