Bloomberg News

IBM Begins Cutting U.S. Jobs in $1 Billion Restructuring (2)

February 28, 2014

International Business Machines Corp. (IBM:US) began dismissing U.S. workers yesterday, part of a $1 billion restructuring to help the company meet profit goals as it adapts to shifts in the technology industry.

Workers in New York, Vermont, Minnesota, Iowa, Missouri, Oklahoma and North Carolina were fired yesterday, according to Alliance@IBM, an employee group. The Armonk, New York-based company had a headcount of 431,212 at the end of 2013, down 0.7 percent from a year earlier -- its first decline in a decade.

IBM is aiming for $20 a share in adjusted earnings by 2015, up from $11.67 in 2010 -- a target made more difficult by seven straight quarters of falling revenue. To get there, Chief Executive Officer Ginni Rometty has fired and furloughed workers, sold assets, cut IBM’s tax rate and bought back shares.

The company has already begun eliminating positions this year in Europe, Asia and South America, according to Alliance@IBM. Worldwide, this year’s job cuts could lead to the elimination of at least 13,000 employees, Toni Sacconaghi, an analyst at Sanford C. Bernstein & Co., said in a Feb. 3 report.

Rometty is seeking to transform IBM as clients shift to storing their data and applications offsite, or in the cloud, rather than buying their own servers.

“IBM continues to rebalance its workforce to meet the changing requirements of its clients and to pioneer new, high-value segments of the IT industry,” the company said in a statement yesterday. At any given time, IBM has more than 3,000 job openings in its growth units, including its cloud business and nanotechnology, the company said.

Hudson Valley

IBM had agreed to keep high-technology jobs in New York’s Hudson Valley through 2016, increasing the number of positions it has pledged to retain by 750 to 3,100, New York Governor Andrew Cuomo said this week in a statement. That would restore the 697 workers fired last year in Dutchess County, where the company had about 8,000 employees as of 2012, according to the county government.

Firings took place yesterday in Endicott and Poughkeepsie, New York, Alliance@IBM said.

The job cuts in New York raise questions about the newly brokered deal between the company and the state, said Assemblyman Kieran Lalor, who represents Fishkill, New York. Fishkill is a town in Dutchess County, where IBM has a semiconductor chip manufacturing plant.

“Both the state and IBM have been short on details about the agreement,” Lalor said in a letter dated Feb. 27 to Cuomo, requesting disclosure of how many people IBM employs in New York and information on the 3,900 jobs not guaranteed under the plan.

Chip Plants

IBM also makes semiconductor chips at its plant in Burlington, Vermont, and servers in Rochester, Minnesota, according to its website. The company has a delivery center in Dubuque, Iowa, that was to create as many as 1,300 jobs when it opened in 2009. The facility provides services including outsourcing-client support, server-systems operations, security services, and maintenance of hardware and software, according to the website. IBM dismissed workers in all three cities, in addition to Columbia, Missouri; Tulsa, Oklahoma; and the Raleigh, North Carolina, area, Alliance@IBM said.

The company has already begun eliminating positions this year in Europe, Asia and South America, according to Alliance@IBM.

Global Restructuring

As part of the shift in its focus to products like cloud services and data analytics, the company agreed in January to sell its low-end server division for $2.3 billion to Lenovo. IBM said it expects to send more than 7,000 workers to the Chinese computer maker in the transaction.

The company is focused on finding a joint-venture partner for its chip-manufacturing business after failing to attract a buyer for the division, two people with knowledge of the matter said this month.

IBM was little changed at $185.17 at the close of trading in New York. The shares are up less than 1 percent since the start of Rometty’s tenure at the beginning of 2012, compared with a 48 percent gain for the Standard & Poor’s 500 Index.

To contact the reporter on this story: Alex Barinka in New York at abarinka2@bloomberg.net

To contact the editor responsible for this story: Sarah Rabil at srabil@bloomberg.net


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Companies Mentioned

  • IBM
    (International Business Machines Corp)
    • $162.05 USD
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