Union: IBM layoff count nearing 3,000 this week

Vendor confirms cuts are being made, after assessment of internal 'skills and resources'

Microsoft Corp. and Sun Microsystems Inc. aren't the only top IT vendors laying off employees this week. IBM may have quietly let more than 2,800 workers go, according to the Alliance@IBM union, which expects even more job cuts at the company.

Lee Conrad, a former IBM employee who now is national coordinator of Endicott, N.Y.-based Alliance@IBM, said the layoffs currently appear to be happening primarily in two IBM units: its software group, and its sales and distribution operations. But Conrad said he expects the cuts to spread to other units in the coming weeks.

Alliance@IBM, a Communications Workers of America local that doesn't have enough members to gain official recognition as a bargaining unit, is getting its information from employees who said they have been laid off. Many are also posting accounts of what's happening at the company on the union's Web site.

Unlike Microsoft, Sun and other technology vendors that have announced layoffs recently, IBM is being reticent about describing its workforce actions and the reasons for them. "We are not going to discuss specific numbers or locations," IBM spokesman Doug Shelton said in a statement, adding that company officials expect some of the affected workers to find other jobs within IBM and that they're "helping them with that effort."

Shelton also avoided the word layoffs and described the cuts as the result of an ongoing workforce skills evaluation process. "IBM continuously evaluates its mix of skills and resources throughout the year and makes changes as needed," he said. "The nature of our business is such that we must constantly assess employee skills and resources and at any given time give IBM the flexibility to match the current and future needs of our clients."

The Alliance@IBM site had been buzzing with rumors about the likelihood of layoffs at IBM for several weeks. The ongoing cutbacks are taking place in the same week that the company topped Wall Street expectations by reporting a 12% profit increase for last year's fourth quarter. IBM reported a 6% year-over-year decline in revenue, to $27 billion, although that was caused in part by the strengthening of the dollar against other currencies.

Despite the generally upbeat earnings report, Andrew Bartels, an analyst at Forrester Research Inc., said there were some dark clouds in it that may be prompting IBM to take action to cut expenses.

For instance, revenue from IBM's hardware business was down 20% in the fourth quarter, a decline that reflects the worldwide economic slowdown, Bartels said. The stronger dollar is also hurting revenue overseas, he pointed out.

Last year, IBM and other IT vendors "were too optimistic about the economic and tech environment," Bartels said. But that has changed, he added. Vendors now "are very worried about the recession being longer and deeper [than expected], and [it's] causing CIOs to cut back even further," he said. "So you're starting to see vendors anticipate weaker growth and demand."

Bartels also speculated that IBM could be positioning itself to make an acquisition, and he pointed to offshore outsourcing vendor Satyam Computer Services Ltd. as possible target. The Hyderabad, India-based Satyam outsourcing firm has been rocked by an accounting scandal after its now-former chairman disclosed earlier this month that the company had substantially misreported its earnings for several years.

Microsoft yesterday announced a plan to lay off 5,000 employees, after its fourth-quarter earnings dropped by 11% year over year. Also on Thursday, Sun disclosed that 1,300 employees were given layoff notices this week, the first wave of a 6,000-worker reduction that the company announced in November.

In addition, Intel Corp. said on Wednesday that it plans to close four chip plants and cut as many as 6,000 jobs.

Copyright © 2009 IDG Communications, Inc.

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