IBM Layoffs Start, Hitting Server And Software Units

February 17, 2014 Timothy Prickett Morgan

After closing out 2013, IBM‘s new chief financial officer, Martin Schroeter, didn’t mince words. After hefty pre-tax losses in its Systems and Technology Group, the company would be rebalancing its workforce, which is an IBM euphemism for layoffs. So is resource action.

Schroeter said IBM would book $1 billion in charges in the first quarter to cover the layoffs, and that would be somewhere between 13,000 and 15,000 of its 434,000 global workforce, depending on which Wall Street analyst you ask. (Last year’s $1 billion in charges covered somewhere between 6,000 to 8,000 workers.) These numbers do not include the 7,500 employees of the System x Division that will move over to Lenovo once that $2.3 billion deal closes later this year. (There is no reason to believe that it will not, with the U.S. government clearly able to get alternate suppliers if it does all indigenous for political, not practical, reasons.)

Everyone was expecting for layoffs in IBM’s hardware unit, with OEM chip sales down, Power Systems in a slump, and System z mainframes entering the middle age of its current product cycle. What has come as a surprise is the rumors of layoffs in Software Group. The rumors are that IBM’s software operations have sustained heavy job cuts, perhaps as high as 6,000 people being shown the door. IBM is reported to have over 100,000 workers in India, where it does a lot of software development as well as managing its vast supply chain of parts. Much of that supply chain work will be unnecessary once it sells off its relatively high volume X86 server business, presumably. IBM is estimated to have far fewer than 100,000 workers in the United States. The company does not report employee count anymore, for political reasons, and it does not announce layoff numbers, either. There ought to be a law for all public companies to have to disclose such information, since it has such a large bearing on local communities.

As of Thursday, Lee Conrad, who has been organizing the Alliance@IBM local chapter of the Communications Workers of America union for decades, said the firings started in India on Monday in Systems and Technology Group, but were followed up three days later in Software Group’s operations there. Workers reporting their RA to the Alliance came to 2,100 layoffs across Brazil and Argentina. There were another 1,290 layoffs reported in Europe. Conrad said that he had heard IBM would be making layoffs in the United States and Canada on February 26.

What affect all of these layoffs will have on the creation and support of hardware and software is hard to say. We will all find out the hard way by living with the consequences.