IBM Layoffs Pass 2,000, Could Go Higher: Reports

IBM has laid off more than 2,000 workers as part of a restructuring that will cost the company up to $1 billion, according to reports.

IBM is in the midst of a round of layoffs that has hit at least 2,000 positions and may reach upwards of 6,000 to 8,000, according to reports.

According to the Alliance@IBM Website, a round of job cuts began June 12 and has thus far affected 2,286 positions. Alliance@IBM identifies itself as an IBM employee organization that gleans information from data provided by sources close to the company as well as from former employees.

Lee Conrad, national coordinator for Alliance@IBM, said some IBM workers in the U.S. began receiving layoff notifications on the evening of June 11, according to a Bloomberg report. Conrad also said the cuts are coming across the board, in several IBM divisions and locations.

"From a broad financial point of view, since the layoffs are part of a larger restructuring related to the company's tough Q1 earnings results, they seem designed to bolster the company's long-term profitability and share price," said Charles King, principal analyst at Pund-IT. "The number of layoffs occurring in the company's Hudson Valley home area could also strain IBM's relations with local communities. In the current economy, any job losses hurt but reducing well-paid professional positions is especially painful."

According to the Alliance@IBM Website, some of the hardest-hit groups have been IBM Software Group marketing, which lost 222 positions; Systems and Technology Group semiconductor research and development lost 165; the Software Group's information management unit lost 137; and the Software Group's industry solutions unit lost 126 positions.

The job cuts are part of a restructuring effort launched in April after IBM posted disappointing financial results, falling short of analyst estimates. At the time, IBM posted first-quarter profits of $3 a share, compared with the $3.05 a share that analysts were expecting—marking IBM's first earnings shortfall since 2005. Overall, the IBM restructuring is estimated to cost Big Blue $1 billion, including severance and other expenses.

This figure prompted Laurence Balter, an analyst at Oracle Investment Research, to project to Bloomberg that IBM could be jettisoning up to 6,000 to 8,000 jobs. That would represent less than 2 percent of the company's 434,236 head count reported at the end of 2012. IBM spent $803 million on workforce restructuring in 2012 and $440 million in 2011.

"In general, [with] restructurings like this, clerical and support personnel are usually deeply affected as well as relatively high-cost research and manufacturing jobs," King told eWEEK. "The safest jobs are those in profitable lines of business and their related sales organizations."

IBM issued a statement regarding its restructuring: "Change is constant in the technology industry, and transformation is an essential feature of our business model. Consequently, some level of workforce remix is a constant requirement for our business. Given the competitive nature of our industry, we do not publicly discuss the details of staffing plans. IBM is investing in growth areas for the future: big data, cloud computing, social business and the growing mobile computing opportunity. The company has always invested in transformational areas, and as a result, we need to remix our skills so IBM can lead in these higher-value segments in both emerging markets and in more mature economies."

IBM's move to strategic growth areas such as cloud, big data, mobile and social has boosted the company's presence in certain areas, and that's "resulted in a great deal of growth in the company's software and services organizations, as well as in groups developing new solutions like IBM's PureSystems offerings," King said. "I doubt we'll see much if any pullback in any of these core IBM strategies."