Tough times for Big Blue

IBM bristles at report of massive layoffs to come

Oy. what a week IBM has had. And it’s only Monday.

Last week, a report surfaced that the IT giant would soon cut a whopping 26 percent of its workforce — or about 118,000 employees — as part of a “Reorg from Hell.”  The story was later picked up by the universe.

Company insiders and former employees who are still close to [company]IBM[/company] have told me they expect big layoffs this quarter. Just before IBM’s fourth quarter earnings call, one insider said if the numbers were bad, IBM would start instituting massive “HP-style” layoffs. The numbers were not as bad as feared, but then it’s all relative.

If the 26 percent layoffs do happen, Sanford Bernstein analyst Toni Sacconaghi noted in a research note that they would “dwarf anything that IBM has done historically since its massive reorganization under [CEO] Lou Gerstner in 1990.” At that time IBM nixed about 60,000 people or 20 percent of its workforce.

Over the last few years, IBM has been nipping and tucking to streamline itself and get costs in line. It’s done things like offering to retrain some employees  in cloud and mobile expertise if they agreed to salary cuts, for example.

So this 26 percent figure is an eye-popping number, one so shocking that IBM took the unusual step of elaborating on its usual official non-comment to say via email (emphasis mine):

IBM does not comment on rumors, even ridiculous or baseless ones. If anyone had checked information readily available from our public earnings statements, or had simply asked us, they would know that IBM has already announced the company has just taken a $600 million charge for workforce rebalancing. This equates to several thousand people, a mere fraction of what’s been reported.

The spokesman added that the company hired 45,000 people last year and now has 15,000 open jobs posted worldwide “for new skills in growth areas such as cloud, analytics, security, and social and mobile technologies.”

Subsequent reports — including one from TechCrunch — dialed back the numbers by about 10x, but didn’t challenge the overall premise that layoffs loom.

This is probably a case where the truth lies somewhere in the middle. The fact that IBM is hiring for hot new skillsets does not mean it will not also wield an ax in other areas.

2 Responses to “IBM bristles at report of massive layoffs to come”

  1. perhaps it would be more apt to suggest they were undergoing network and hardware segment infrastructure assessment bit . ly/1t T5O Lu (that corporate re-structuring?) but agreed, there is always a tendency in this industry to unduly amplify stuff. – Eamon Walsh, IDG blogger posting on behalf of PC Connection