IBM to fix bad quarter by axing 13,000 jobs

Heads roll to shareholders

IBM will carve up to 13,000 workers from its payrolls with European staffers taking the majority of the hit, the company announced today.

The actual layoff range provided by IBM stretches between 10,000 and 13,000 workers, who will be axed via both voluntary and involuntary means. These actions will lead to IBM taking between a $1.3bn and $1.7bn charge in its second quarter.

Are the layoffs a shock? Hardly.

Analysts speculated about a five-digit firing ever since IBM posted lackluster first quarter results. IBM blamed weak mainframe and storage sales and slow sales in Europe for a significant earnings miss. Now, it seems, European workers will have to pay the price.

"The actions will accelerate progress toward more globally integrated operations, while addressing profitability in slower-growth regions, primarily in Europe," IBM said in a filing with the US Securities and Exchange Commission. Later in the filing it added, "The majority of the overall workforce reductions are planned for Europe, and the company has initiated discussions of these changes with local consultation bodies."

One could easily argue that IBM is being a bit rash with these moves. On the surface, it appears that Big Blue is firing a huge quantity of staffers just to please shareholders. Its mainframe and storage businesses have performed well over the last couple of years - so does one miss justify such a broad stroke?

Last August, IBM bragged that it would hire 19,000 new staffers by the end of 2004. More than half that total is now being sent packing just four months into the new year.

What dramatic change has taken place in IBM's business to warrant such a mood swing?

IBM's rivals have not seen the same slowdown in overall IT spending or European weakness mentioned again and again by Big Blue. So, again, what gives? ®

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