Business Tech

With the recession continuing its hold on the economy, IBM is reportedly preparing for another round of layoffs, according to a report Wednesday in The Wall Street Journal.

The cuts are expected to affect a large swath of U.S. employees in IBM's global business services unit, with a number of the jobs reassigned to workers in India, the Journal reported.

Talk of pending layoffs in IBM's services unit is making the rounds on Alliance@IBM, a Communications Workers of America affiliate attempting to organize IBM workers into a union.

On the Alliance@IBM site, two posts Wednesday referenced pending layoffs in the services unit:

Comment 3/25/09: I talked to two different Band 10s in IBM Global Business Services yesterday who have both said that tomorrow will be a big day for firing in almost all of the GBS business units. Both of them are expecting that they will be cut because the percentages are going to be higher at the higher levels. Both made reference to this could be called a black Thursday. I know that several employees have been contacted by their manager to have a short meeting that day. My manager has not said anything to me yet but I am already preparing myself for the news. -Anonymous-

Comment 3/25/09: 'there is definitely a GBS lay off coming very soon. Big lay offs across the board' Thank you, -modest mouse-. This is welcome news to those being tortured on the bench. -anonymouse-

IBM was not immediately available for comment.

In January, IBM had a round of layoffs, but declined to disclose the area of the cuts, or location. Published reports, however, referred to North America as the location of the layoffs.

Big Blue tentatively has its first-quarter earnings report scheduled for April 20.

Memory chipmakers, the hardest-hit of the silicon suppliers, this week faced bankruptcy, layoffs, and bleak prospects.

Micron Technology kicked things off by announcing that it would cut as many as 2,000 jobs. Micron and other memory chip manufacturers are all singing the same sad song: slumping revenues amid a steep downward price spiral.

The largest U.S. maker of memory chips said decreased demand for specialty DRAM products had "created additional challenges" for its Boise, Idaho, manufacturing operations. As a result, Micron said it will phase out 200-millimeter wafer manufacturing operations at the company's Boise facility.

The same day, flash memory chipmaker Spansion, previously a joint venture of Advanced Micro Devices and Fujitsu, announced layoffs totaling approximately 3,000, or 35 percent of the company's total workforce.

Spansion's CEO, John Kispert, said the Sunnyvale, Calif., company has been forced to "bring our costs in line with the current expectations for significantly reduced revenues."

Kispert also mentioned that he is positioning the company for a "restructuring and/or sale." The company expects the reduction in workforce to provide it with annual cash cost savings of approximately $225 million.

But this wasn't the worst of it. Qimonda, an affiliate of Germany-based Infineon Technologies, said on the same day that it was seeking bankruptcy protection under Chapter 11 for its U.S. unit. In January, Qimonda filed for insolvency protection in Germany after it was not able to secure government financing.

Intel topped off the bad news on Wednesday by disclosing that it was considering getting out of the flash memory-manufacturing business. Intel CEO Paul Otellini made this statement at a Goldman Sachs investor's conference: "It may not be essential for us to have our own NAND factories to build (flash memory). We could probably specify the product that we want and buy it from third parties," he said.

Is there any upside to all this bad news? Maybe.

"A lot of the end-market conditions for all electronics are awful, but we know all this already, and to a certain extent, that is looking backward," said Avi Cohen, managing partner of Avian Securities, which tracks the memory chip market. "Several component (suppliers) and semi(conductor) guys have echoed the fact that February is not getting worse, which is a nice improvement."

Micron Technology is cutting as many as 2,000 more jobs because of slumping demand for its products, as the shakeout in the memory chip business continues.

The largest U.S. maker of memory chips said Monday afternoon that decreased demand for specialty DRAM products has "created additional challenges" for its Boise, Idaho, manufacturing operations. As a result, Micron said it will phase out 200 millimeter (mm) wafer manufacturing operations at the company's Boise facility.

"This action will reduce employment at Micron's Idaho sites by approximately 500 employees in the near term and as many as 2,000 positions by the end of the company's fiscal year," the company said in a statement. Its fiscal year ends in August. Micron added that it has sufficient manufacturing capacity remaining and "does not expect any disruption in product supply required for customer needs."

These job cuts are on top of the workforce reduction announced in October in its flash memory chip operations, the company said. "These workforce changes were not anticipated or included in Micron's earlier 15 percent global workforce reduction announcement last October."

This news follows quickly on the heels of an announcement by German memory chipmaker Qimonda, which said earlier Monday that its U.S. operations would seek Chapter 11 bankruptcy protection.

Micron said that market conditions are not improving for memory products. "We remained hopeful that the demand for these products would stabilize in the marketplace and start to improve as we moved into the spring. Unfortunately, a better environment has not materialized," said Steve Appleton, Micron chairman and CEO, in a statement.

The company will continue to operate its 300mm research and development fabrication facility at the Boise site and perform a variety of other activities.

Cash restructuring charges will be approximately $50 million, which will generate a gross annualized operating cash benefit of $150 million, the company said. The net operating cash flow effect will be neutral for fiscal year 2009.

In the fiscal first quarter ended December 4, Micron posted a net loss of $706 million.

The memory chip industry overall has been caught in a particularly brutal downward price spiral that is hurting even the largest players, including companies like Samsung and Hynix.

Baby New Year faces a tough time finding a job in this climate.

U.S. job cuts announced in January soared to 241,749 across all industries, marking the largest monthly cut in the past seven years, according to a report released Wednesday by Challenger, Gray & Christmas.

The computer industry ranked No. 3 among the industries facing the biggest ax in January, with 22,330 layoffs announced.

For an industry already under siege, it offers little encouragement after the tech sector exited last year with 186,955 job cuts in the telecommunications, computer, and electronics sectors. That figure was 74.2 percent higher than the previous year, according to a Challenger report from last week.

(Credit: Challenger Gray & Christmas)

The month of January has faced the heaviest onslaught of layoff notices over the past seven years, and it comes as no surprise that the retail industry tops the list of hardest-hit industries.

Retailers announced 53,968 job cuts in January, a record for the industry, according to the report.

The industrial goods sector ranked second, with 32,083 cuts announced last month, followed by the computer industry, then the pharmaceutical industry with 22,063 cuts, and aerospace-defense with 17,800.

John Challenger, CEO of Challenger, Gray & Christmas, said in a statement:

Industries that first appeared to be immune to downturns, such as computer and pharmaceutical, are now rapidly shedding workers.

Unfortunately, there is no light at the end of the tunnel yet. Even if the stimulus package is successful, it could take months to make a noticeable impact on the employment picture.

In the meantime, jobs are being clear-cut in the tech industry. On Wednesday, Panasonic announced 15,000 job cuts. On Tuesday, Electronic Arts announced 1,100 layoffs.

Even coming off a healthy quarter, business software titan SAP says it needs to cut costs for the coming year--and as elsewhere in the tech sector, that means job cuts.

SAP said Wednesday that for the fourth quarter, it had net income of 850 million euros ($1.1 billion) on revenue of 3.5 billion euros. Those figures represent a gain of 13 percent in net income and 8 percent in revenue year over year.

Revenue in software and software-related services at the Walldorf, Germany-based company was 2.7 billion euros, up 8 percent year over year.

For the full year, SAP's net income was 1.89 billion euros, down 2 percent from 2007, while revenue was 11.57 billion euros, up 13 percent.

But a troubling and unpredictable economic climate means that SAP, like many other companies inside and outside of high tech, will continue tightening its belt. SAP said Wednesday that it plans to trim its worldwide workforce by about 3,000 positions by the end of 2009--from 51,500 down to 48,500 jobs.

SAP said that the job cuts, at least some of which it expects to come through attrition, will lead to annual savings of 300 million euros to 350 million euros starting in 2010.

Here's how SAP sees the business environment for the coming year:

The Company expects the 2009 operating environment to remain challenging. In addition, 2009 will no longer include the positive effects from the acquisition of Business Objects, and the 2009 first-half results will be a difficult comparison to the strong results reported in the first half of 2008, which was prior to the economic crisis that disrupted the global markets in the third quarter of 2008.

For those reasons, SAP did not provide a specific outlook for software and software-related service revenue for full-year 2009.

Oracle has sliced approximately 500 positions from its sales and consulting staff businesses in North America, according to a report in The Wall Street Journal.

The positions, which would account for less than 2 percent of Oracle's North American workforce as of November, were cut on Friday, according to the Journal.

Oracle's reported layoffs come at a time when a number of companies across all industry sectors are slashing their workforce by double digits as the economy languishes in a recession.

And while other companies are making staff cuts amid steep declines in their revenues and earnings, Oracle's last quarterly report in November posted a 6 percent increase in second-quarter revenues and a modest 1 percent decline in net profits.

Oracle declined comment on the reported layoffs.

The XO laptop.

(Credit: OLPC)

The One Laptop Per Child project announced Wednesday that it is slashing its workforce by 50 percent, reducing salaries for the remaining staff, and restructuring its operations.

Nicholas Negroponte, founder of the group that aims to provide low-cost laptops to children in developing countries, announced the cuts in a company blog post:

Like many other nonprofits that are facing tough economic times, One Laptop per Child must downsize in order to keep costs in line with fewer financial resources. Today we are reducing our team by approximately 50% and there will be salary reductions for the remaining 32 people. While we are saddened by this development, we remain firmly committed to our mission of getting laptops to children in developing countries. We thank team members who are departing for their contributions to this important mission.

Restructuring brings with it pain for some of our friends and colleagues who are being let go. These are people who have dedicated themselves to the advancement of a noble cause, and to say that we are exceeding grateful for the time, the ideas, the energy and the commitment they have given OLPC does not -- cannot -- adequately express our admiration or our gratitude. The fact that there are 500,000 children around the world who have laptops is testament to their extraordinary work and is already a key part of OLPC's legacy.

Negroponte wrote that the company will focus on development of its second-generation device, but will hand-off development of the Sugar operating system to the open source community.

The project recently revived its two-for-one deal on its low-cost laptop. Amazon.com was tapped to handle its Give One, Get One program, launched initially in 2007. Through the program, anyone can pay for two XO laptops; one is shipped to the buyer, and the other is sent to a school kid in a developing nation.

The device comes loaded with both Windows XP and the Linux-based Sugar operating system created for the XO. The inclusion of XP stemmed from concerns that developing nations that wouldn't buy the laptops for its classrooms without the world's dominant OS on it.

However, the Cambridge, Mass.-based group has faced its share of challenges in the three years since it was formed. Its XO laptops initially cost $188 each instead of the anticipated $100, some countries are scaling back their deployment plans. Intel, which was briefly part of the project, quit in January 2008, claiming OLPC was pressuring it not to compete with its own laptops.

IBM is cutting pay for workers at chip manufacturing plants in New York and Vermont. This comes on the heels of job cuts at the Vermont facility.

IBM chip manufacturing facility

(Credit: IBM)

Some shift workers at IBM's semiconductor plant in Essex Junction, Vt., will see net pay reductions of up to 10 percent in early 2009, said Jeff Couture, an IBM spokesperson.

In effect, a 20 percent premium for shift workers is being eliminated, according to Couture. To mitigate employee earnings losses, IBM is making a one-time base pay increase, he added. However, even with this increase, the "net for employees will range from no impact to a maximum of 10 percent (pay cut)," he said.

The report first appeared in the Burlington Free Press.

Overall, pay cuts would affect about 3,500 workers at plants in Poughkeepsie and East Fishkill, N.Y., as well as Essex Junction, Couture said.

Though revenue from IBM's Systems and Technology segment totaled $5.2 billion in the second quarter, up 2 percent year over year, revenue from "microelectronics OEM" (which is within the Systems and Technology group and includes chipmaking-related operations)--decreased 19 percent, according to the IBM 2008 second-quarter earnings report.

One aspect--not surprisingly--of the pay-cut move "is to reduce costs," Couture said. The other imperative is to remain competitive with rivals that don't pay the kind of premiums that IBM is paying.

IBM competes worldwide with companies like Taiwan Semiconductor Manufacturing Company (TSMC) and Chartered Semiconductor.

The Essex Junction facility is a contract manufacturing operation that builds chips that go into cell phones, DVD players, TVs, and other consumer electronics devices, Couture said. East Fishkill, on the other hand, builds the specialized processors that go into Sony's PlayStation, Microsoft's Xbox, and the Nintendo Wii, among other products.

Earlier this year, IBM announced 180 job cuts at the Essex Junction plant, reducing the employee count to about 5,400.