News > Technology
IBM cuts more jobs, sets charge
Company's semiconductor unit lays off 1,500 as total number of layoffs nears 7,000.
June 4, 2002: 8:33 PM EDT
By Richard Richtmyer, CNN/Money Staff Writer

NEW YORK (CNN/Money) - IBM began its third round of job cuts Tuesday, this time in its U.S.-based microelectronics division, where roughly 1,500 employees are being let go.

The latest cuts bring the total number of layoffs among IBM's U.S.-based employees to nearly 7,000, although the company has not provided an official tally.

graphic graphic
But IBM did say late Tuesday that the job cuts and other recent actions will result in a charge of $2 billion to $2.5 billion, most of that to be taken in the second quarter.

"We cannot be more definitive at this time, but we wanted to provide the strategic basis for these actions," John Joyce, IBM's chief financial officer, said in a conference call Tuesday evening.

Joyce said investors will start to see the financial benefits of the job cuts and other recent actions in the second half of this year, although he declined to provide any specific details, promising to do so after the company reports its second-quarter results in July.

Bill O'Leary, a spokesman for IBM Microelectronics, said the cuts there are spread across the board, mostly at the division's major facilities in Burlington, Vt., and at Fishkill and Endicott, N.Y.

Before the cuts, IBM Microelectronics -- through which the tech titan designs and sells a wide range of semiconductor products -- had roughly 20,000 employees, O'Leary said.

O'Leary said the cuts are part of a broader realignment of IBM Microelectronics, a large part of which will include stepping up its efforts to manufacture chips for other companies on a contract basis, referred to in the industry as the foundry business.

"We're seeing a lot more demand for high-end technology these days," O'Leary said.

IBM Microelectronics, which is set to begin production at a new facility in Fishkill this summer, also will sharpen its focus on promoting the use of its PowerPC microprocessors as well as its custom-designed chips, O'Leary said.

At the same time, the company over the next several months will be thinning down some of its non-core product areas, although he could not provide specifics. He did say the company may consider divesting some of its chip operations.

Although IBM has not released an official tally, company watchers estimate that more than 6,000 employees have been laid off so far, while an additional 18,000 are expected to be removed from the company's payroll following the creation of a hard disk-drive joint-venture with Hitachi.

IBM, the world's largest supplier of computer hardware and information technology services, began laying off employees two weeks ago, starting with its server division, where more than 1,000 lost their jobs, according to figures compiled by Alliance@IBM, a labor union representing about 4,000 IBM employees.

Last week, the cuts were centered on IBM's services division where, by the union's count, more than 2,100 jobs were cut.

An additional 2,200 layoffs were made throughout the company, including its software, data-storage systems and financing divisions as well as at its corporate headquarters in Armonk, N.Y., and its sales and distribution facilities across the country, according to the union.

Job cuts had been largely anticipated at IBM since April, when the company reported a drop of more than 30 percent in first-quarter earnings amid a continued slump in corporate IT spending.

Lee Conrad, Alliance@IBM's national coordinator, said the looming job cuts have hurt morale within the company. And while some more job cuts are expected, it appears as if most of those employees who will be losing their jobs have now been notified.

"We're hoping that this is the end of it," Conrad said.

Shares of IBM (IBM: up $1.20 to $79.31, Research, Estimates) rose 1.5 percent in New York Stock Exchange trade Tuesday. Over the last year, the stock has fallen 38 percent from a high of $126.39.  Top of page