IBM issued 1,674 layoff notices to U.S. employees in its applications services business on Thursday, as part of a larger round of anticipated cuts to its Global Business Services unit, according to a national representative of Alliance@IBM, an affiliate of the Communication Workers of America, which is seeking to unionize IBM.
The applications services business is one of several areas in IBM's Global Business Services unit, a massive consulting arm that last year generated $19.6 billion in revenue for Big Blue. The Global Business Services unit also posted a 9 percent increase in its revenue.
Alliance@IBM anticipates between 4,000 to 5,000 job cuts to be issued Thursday at IBM's Global Business Services unit, noting the cuts would be on par with those layoffs taken earlier in the year.
"We saw 5,000 job cuts in January-February and with the 5,000 we're expecting today, that brings it up to 10,000 cuts for just this quarter alone," said Lee Conrad, national coordinator for Alliance@IBM. "Many of these jobs are moving offshore and it's a disturbing sign for IBM and the nation."
An IBM spokesman was not immediately available for comment.
UBS analyst Maynard Um, meanwhile, noted in a research note Thursday that he finds it unlikely IBM will transfer all of the affected U.S. positions to cheaper overseas labor markets. As as a result, he anticipates a potential benefit of 10 cents to 14 cents a share to IBM's 2009 earnings.
He also noted that the cuts could signify more aggressive action than previously anticipated from IBM, though it would not be out of line given feedback he has received from the industry suggesting greater employee restructuring.
Um stated in his research note:
In Feb., IBM reaffirmed 1Q09 & FY09 EPS guidance, noting Jan. results were consistent with its outlook, aided by a strong software pipeline & solid long term services bookings. Read-through from potential further restructuring, in our opinion, is mixed. Operational efficiencies may be beneficial to EPS, but may also reflect a more challenging rev environment than thought (perhaps more in the US).
IBM shares were up less than 1 percent to $98.47 a share in morning trading Thursday.
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.
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.
Correction, 12:50 p.m. PST: This story initially mischaracterized a statement made by John Challenger regarding the severity of recent tech-related job cuts. He does not expect them to be as severe as those during the dot-com bust. Also the percentage figures cited within the various sectors reflect the increase in layoffs last year compared with 2007, and not the percentage of jobs cut.
Job cuts in the tech sector increased 74.2 percent in 2008 compared with the previous year, as the industry was battered by an unrelenting wave of layoffs, according to a report released Thursday.
Last year, 186,955 jobs in the telecommunications, computer, and electronics sectors were slashed, according to the report by outplacement consulting firm Challenger, Gray & Christmas.
And the bulk of those cuts, nearly three-quarters, came during the last six months of the year, the report noted. That drove the tech sector to unemployment levels not seen since 2003, according to the report.
"Through the first half of 2008, it looked as though the tech sector might be one of the few areas of the economy to remain resistant to recessionary pressures. However, the economy's continued slide here and overseas saw consumer and corporate demand for technology products and services drop rapidly, and these firms were suddenly under pressure to make significant cost-cutting moves," John Challenger, CEO of Challenger, Gray & Christmas, said in statement.
AT&T, for example, announced 12,000 job cuts last year, while Sun Microsystems unveiled plans to cut 6,000 positions, and Xerox 3,000 jobs.
Within the various sectors in tech, electronics firms saw losses of 73,447 jobs, an increase of 89.7 percent over the previous year; the telecommunications industry saw an increase of 72.5 percent; and cuts in the computer industry were up 61.3 percent.
And in the Silicon Valley, for just the month of December, the unemployment rate rose to 7.7 percent in Santa Clara County and 5.9 percent in San Mateo County. Nationwide, the unemployment rate reached 7.2 percent for the month of December.
And the forecast for 2009 is not looking much better.
"Cuts could reach even higher in 2009, as there is no evidence yet that the economy has hit the bottom of this downward portion of the cycle. We almost certainly will not see a repeat of the 2008 first quarter, in which tech cuts totaled just 17,345," Challenger said in a statement.
He added, however, he does not expect technology-related job cuts to be as severe as the dot-com bust, when 36 percent of all layoffs across a wide swath of industries came from tech.
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.
Akamai Technologies announced Wednesday that it's cutting 7 percent of its workforce, as the Web content delivery company pares back its costs.
Cambridge, Mass.-based Akamai expects to cut 110 positions in the fourth quarter, a move that is anticipated to result in a $4 million restructuring charge.
"We have not changed our business outlook," J.D. Sherman, Akamai CEO, said in a statement. "However, we want to ensure that we can keep investing for growth even in the current economic climate."
The Web content delivery company also expects to lose approximately $2.5 million in income from subleasing some of its facilities.
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