News > Technology
IBM still swinging axe
Cuts this week centered on services division, but the magnitude of the layoffs remains unclear.
May 30, 2002: 4:18 PM EDT
By Richard Richtmyer, CNN/Money Staff Writer

NEW YORK (CNN/Money) - IBM is continuing to cut its U.S. work force this week, with the majority of the layoffs taking place among the ranks of its information technology services division.

But the magnitude of those cuts, as well as the total number of jobs the tech titan plans to eliminate across the entire company, remains unclear. The company has confirmed that it is cutting jobs but is refusing to provide specifics.

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"I can confirm that there are some actions in global services this week," IBM spokeswoman Carol Makovitch said.

She said the company's policy is not to disclose the number of employees being laid off nor to comment on the time table under which the cuts will be made.

IBM (IBM: Research, Estimates) , which fell $1.11 to $80.49, is the world's largest supplier of computer hardware and, through its IBM Global Services unit, also ranks first in worldwide IT services. The unit has more than 150,000 employees worldwide, and, at $35 billion, accounted for roughly 40 percent of IBM's total revenue last year.

So far, at least 200 of IBM's services employees have lost their jobs, according to Lee Conrad, national coordinator for the Alliance@IBM, a labor union representing about 4,000 IBM employees.

The union, an affiliate of the Communications Workers of America, has been chronicling the job cuts, which began in earnest last week and generally are expected to continue through early June.

Because IBM's global services unit is somewhat fragmented, with many employees working from their homes and others scattered in small offices across the globe, determining the actual number of cuts there will be difficult, Conrad said.

"We're hearing that the list is about 2,000 people in this round, but that's unconfirmed right now," he said.

This week's layoffs come on the heels of a raft of job cuts last week, mostly from the company's server division. There also have been cuts in IBM's software unit as well as other parts of the company.

By the union's count, some 1,009 employees in the server division lost their jobs. At the same time, the organization was able to confirm at least 700 job cuts from IBM's software unit.

The job cuts have been widely expected since April, when IBM reported a drop of more than 30 percent in first-quarter earnings amid a continued slump in corporate IT spending.

The company's new CEO, Samuel Palmisano, hinted that layoffs would be happening when he met with analysts on Wall Street earlier this month.

But IBM is continuing to keep secret the actual number of employees who will lose their jobs, and the company's policy is hurting morale, according to Conrad.

"Palmisano came out and said job cuts were going to take place. Well, let's get it over and done with and let's figure out what the true numbers are," Conrad said.

"I don't understand why they're playing this kind of game with everybody," Conrad added. "It's really having a negative impact on the business."

At last count, IBM employed more than 319,000 people worldwide, roughly 160,000 of whom were based in the U.S. Some industry observers suggest that the sheer size of the company and the scope of its operations make it nearly impossible for IBM to provide a specific number of expected layoffs.

Sam Albert, an independent IT industry analyst and management consultant, said that IBM's top management does not mandate a specific number of job cuts but instead delegates such decisions to the company's various divisional managers.

"IBM doesn't know what the number is until all the units that they've delegated this to report back," said Albert, a former IBM executive who left the company in 1989.

"I don't think IBM is trying to hide anything from anybody," Albert added. "I think it's just doing things thoughtfully, methodically and as each individual unit decides what it decides to do. So there is no aggregation of these figures."

Albert also pointed out that roughly 17,000 employees will be removed from IBM's payroll as a result of the company's joint venture with Hitachi, through which the two companies will develop and market hard-disk drives.

Overall, Albert estimates that 7,000 people are likely to be let go in the this round of layoffs, which would be relatively small when compared with the magnitude of the job cuts the company has made during similar business slumps in the past.

"If the economy doesn't turn around, maybe it will go to 10,000. Maybe it will go to 14,000, or even double that figure," Albert said. "But that's still not massive."  Top of page