IBM begins layoffs in cost-cutting drive

A labor group say 1,300 US workers have lost their jobs, and lots more worldwide could also get slashed.

By Jonathan Berr Jun 13, 2013 11:10AM
A man walks past the IBM logo at the CeBIT technology trade fair on February 28, 2011 in Hanover, Germany (© Sean Gallup/Getty Images)Big Blue is singing the blues.

According to Bloomberg News, IBM (IBM) has cut 1,300 jobs in the U.S. as CEO Ginny Rometty tries to rein in costs. The layoffs include 222 people in marketing and 185 in semiconductor research and development, Lee Conrad, a coordinator for Alliance@IBM, which has tried for years to organize the tech giant's workers, told the news service.

IBM, which is taking about $1 billion in charges to slash its payroll in the current quarter, confirmed the job cuts to Bloomberg, but not the specific figures. 

Divining the impact of the layoffs on IBM is tricky because the company stopped disclosing the number of workers it employs in the U.S. a few years ago after critics accused it of sending good-paying U.S. jobs to lower-cost countries.

Worldwide, it had about 434,000 employees as of year-end 2013. One analyst Bloomberg quoted estimated that as many as 8,000 workers may lose their jobs globally in this current round of cost cuts. Most of the affected workers would be outside the U.S.

Rometty, the first woman to head the iconic tech company, is under pressure from Wall Street to improve Big Blue's financial performance after it recently posted its first earnings report that fell short of investors' expectations since 2005. Many of IBM's businesses struggled. Services, once a reliable cash cow, saw a 4% decline in revenue. Software sales were flat, and its hardware business plunged 17%.

The company is now in a bind. Since its struggles are well known, IBM's customers won't be shy about asking for discounts before agreeing to buy its software, hardware and services.  That will put even more pressure on IBM's profit margins as Rometty tries to right the ship.

Jonathan Berr does not own shares of the listed stocks. Follow hm on Twitter @jdberr.


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35Comments
Jun 13, 2013 3:00PM
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I worked for IBM for 11+ years. It was hands down the worst company I ever worked for. They couldn't care less for their employees and will look for any excuse to not give them a raise of a bonus. There was a constant fear amongst employees of being laid off, and in the end, I had sympathy for these wide-eyed newcomers that would come in with lofty ambitions. You knew that it was only a matter of team before they were beaten and disillusioned.

The company lost so much great talent, so much embedded knowledge, just to save a buck. It is a terrible place and I would advise anyone entering the workforce to avoid it at all costs.

Jun 13, 2013 3:59PM
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Great example of what is REALLY going on in the market.  Here is an age old company with DECLINING revenues that is still making a profit.  How do they do it you ask?  With thousands of layoffs and any accounting loophole they can get their hands on.  There are many more companies just like this.  I believe it was approximately 68% of the companies did not meet their revenue expectations for the first quarter.  Yet, the market kept going up.  Could it have something to do with the Fed pumping in $85 Bil per month?  Without that stimulus, this would be about a 10,000 market.  The day to pay the piper is coming.  There are only so many employees to layoff and only so many accounting tricks.  Eventually, you have to have revenue to make a profit.
Jun 13, 2013 3:27PM
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We keep reading blurbs about how IBM is so exceedingly profitable.  If this is so, why do they need cut costs?  Wait for the other shoe to drop.  I'm betting that we'll get news that the top execs are getting outrageous bonuses because they were so good at cutting costs.  Disregard that it was at the cost of someone's livelihood and the only reason for it was the bonuses.
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It was the greatest Company in the World when I worked there in the 60's - 80',s and it didn't get $1.00 in federal tax subsidies.

 

I guess it should have renamed itself IBM Oil, then it'd be getting billions like Exxon, Mobile, etc,. etc.

 

Or IBM Ag would have worked as well, unfortunately.

 

But it had, and has, too much class to be a leach on American taxpayers.

 

Apple, anyone?

Jun 13, 2013 2:33PM
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So how much and how many bonuses does the top brass make??
Jun 13, 2013 4:08PM
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Isn't that the way with most big companies? I worked for a couple of big name companies back in the 80's and 90's.  They were awesome until everyone started putting their hands out.  I remember the company parties and outings---and oh my God, the Christmas (now they call them Holiday) bonus were really something to look forward to.  The longer I stayed, the more corners were cut. Ah for the good old days!  But I can say that Karma has come back to bite the company that laid me off. They are currently being audited by the IRS  AND the FBI!  HAHAHAHAHAHAHAHAHAHAHAH! (continue on aimlessly in maniacal laughter).
Jun 13, 2013 2:59PM
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The company is so large that people at the top make decisions to lay off people and not know what the do. Talk about losing in the long run to save money now.
Jun 13, 2013 5:38PM
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It is sad that such a one time great company is now left with downsizing as it's only means for making forecasted profit numbers. This trend unfortunately has been going on at IBM for the last several years.  They definitely have a revenue problem that your Highness Rometty needs to figure out how to strategically address.  Trashing employee moral with continuous layoffs and taking away of benefits is not going to create an environment that will accomplish their needed revenue growth goal. 

  

Jun 13, 2013 1:19PM
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It is not your father's IBM anymore and has not for years, the days of $600.00 stock shares and stock splits....................
Jun 13, 2013 7:09PM
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IBM was originally a hardware company.  They made their living selling blue boxes and was very innovative.  Some time ago they transformed into a service company with a smaller emphasis as a box maker.  They had some major strategic blunders (like thinking the PC would only be personal computer used from home).  Once you go the service route you lose a lot intellectual property because you are selling (consulting) other manufacturers products or services as well.  It is very much a microcosm of what the U.S. economy is experiencing.  In general, it is bad for everyone because they are planning with shorter and shorter time horizons. 
Jun 13, 2013 4:00PM
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Are you all daft?  This is all "corporate" and "market" manipulation. There are the "same" in this nonsense.  Riddle me this... how is it that the "markets" .... seem to rebound where they were before...and, make the "markets" go up?  It is done on "their" whim by pushing buttons.  How can one possibly think that our economy is thriving to push "markets" up. This is a primary example.

Jun 13, 2013 6:50PM
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Simple solution.  Prohibit the companies from off-shoring the work. They say, they can not compete. Let them sell and build the goods for non-US market outside, and for US market on-shore. Call me a protectionist but how are you going to compete with people earning $20/month and living on that money. One way is giving those $20/mo engineers US citizenship and have them live here but no H1 L1 etc. We need smart people here not off-shore. When they are here, they pay taxes and live by US rules and no more $20/mo. I do not really care if they can not afford an internet connection in China, Vietnam, Pakistan or India. This is a problem for their respective governments. What we have now is a bunch of H1er types making money in US and spending majority of it elsewhere.  Not a good policy for country, good policy for Corp.
Jun 13, 2013 4:19PM
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Suckers Rally big time today market....PUMP and DUMP at its most obvious!!
Jun 13, 2013 5:11PM
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So many companies now are in the same fix.  They layoff to show a profit  and then rehire when things pick up again.  It makes everything work on paper and they show a profit.  Then when business comes back to them or things pick up they re-hire and re-train workers which costs a tremendous amount of money and strain on the company.  Most of it all has to do with the lies they put themselves in.  They use accounting and layoffs to show profit and then envelop themselves in the layoff cycle.  I honestly believe it is all by design though.We have become a super corporate state which has reached its boundaries.  The only way they can perpetuate their failed system is to move into a super corporate world of consolidation and the errosion of the nation state.  Its not looking good fellas...
Jun 13, 2013 6:59PM
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why does any company expect consumer loyalty they are out for themselves and I shop around for the cheapest best product whomever the maker happens to be at whatever distributor
Jun 13, 2013 10:31PM
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Other than Apple, IBM made one of the first personal PCs on the market, but IBM did not go the Apple rout and keep their PCs in house like the Apple model , so now ANYBODY can build one like HP and other companies, my IBM based PC I have now is an homebuilt that I made myself from components like motherboards, power supplies, graphics cards, etc. It is all from their original technology. I built mine as an new gaming machine this year so it has lots of horsepower under the hood. (Take that  XBOX and PlayStation) All my parts were bought from NEW EGG by the way so you can get an idea of what I mean.
Jun 15, 2013 3:04AM
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Worked in manufacturing for 23 yrs. I payed the bills by working a bunch of OT rotating shifts and 12hr. days. I was locked in by my own fault of not going to college but that did not stop me from trying to move up in rank which was impossible unless you were a minority.  Raise, bonus,lol what a worthless bunch of managers I worked for who lied and BS'ed you to death.
Most of the managers were hangers on who could not make a good decision if it was staring them in the face, not to mention banging any women who they would promote,lol. I was there when IBM had its first layoffs ever. It got worse from there.
F**K IBM.....I would never suggest anyone work there...They have a nice habit of getting rid of people so they can hire 3rd world temps so they dont have to give them benefits.

ReddingGuy is right-on!!! 
 

Jun 13, 2013 10:27PM
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I've worked under a few IBM contracts.  Can you say screw the client?  Bill more, add more people, regardless of the clients real needs.  They are a good part of the reason IT is so expensive for the local state governments.   People are versatile.   Get rid of the restriction caused to employee by unions and let the employees fix this crap.. Paying IBM $250 an hour because it's not part of a union employees job is nuts.  WAKE UP!!!!
Jun 14, 2013 2:16AM
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Wow!!!!! I don't think I've EVER pondered IBM laying off a person, but OMG ><8,000 people!!!
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