May 06, 2005

I.B.M. to Lay Off Over 10,000

I.B.M. announced yesterday that it would lay off 10,000 to 13,000 workers, mostly in Europe. Most of the cuts will come from Germany, Britain, Italy and France, some will also be made in the United States, where I.B.M. employs 120,000 people. The cutbacks come after I.B.M. reported disappointing quarterly earnings last month and the price of its shares dropped reports New York Times. I.B.M. portrayed the move as mainly an evolution in its strategy of globalizing its operations by moving back-office work like accounting and procurement to low-cost locations and pruning operations in high-cost and slower-growth markets like France, Germany and Italy.

I.B.M. will take a charge of $1.3 billion to $1.7 billion in the current quarter to pay for severance packages and other payments to the laid-off workers.

IBM on Thursday it said it could save $300 million to $500 million this year and still meet earnings targets for the second half thanks to the cost cuts. IBM Chief Financial Officer Mark Loughridge said he expected to meet earnings targets for the second-half of 2005 "mainly through cost-cutting" instead of revenue growth.

Fred McNease, an IBM spokesman based in the company's European headquarters in Paris, said job cuts begin to go into effect on July 4. IBM began talks with employee representatives at affected locations starting in February, he said.

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 Europe.

On Sunday, IBM completed the sale of its PC business to Lenovo Group of China for $152.2 million resulting in the transfer of another 10,000 IBM PC employees to Lenovo's payroll.

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