IBM said it would lay off up to 13,000
employees, or about 5 percent of its workforce, as part of a restructuring plan to address a sagging global revenue picture.
Most of the cuts are planned for its Europe operations, IBM said in a brief release Wednesday. As a result, IBM said it would take a pre-tax charge of between $1.3 billion and $1.7 billion in the second quarter as a result of the actions.
The announcement follows rough results from Big Blue’s recent first quarter earnings release, during which IBM said it missed guidance by five cents per share.
Although it pulled in a profit of $1.4 billion for the quarter, up 2.9 percent, revenues flattened out by about 3 percent to $22.9 billion and sales across some major groups looked soft, including its global services unit. Global services takes in more than half of IBM’s revenues.
At the time, IBM blamed difficulties closing several key deals and slowing growth in overseas markets. Analysts shuddered that it was a sign of slowing growth in global markets. IBM officials pledged to work harder at executing its sales strategies.
“The moves will accelerate progress toward more globally integrated operations, while addressing profitability in slower-growth regions, primarily in Europe,” IBM said about the layoff news.
These actions will also allow IBM to shift resources to higher-growth markets and opportunities such as Business Performance Transformation Services, IBM said.
The company is expected to realign operations and organizational
structure in Europe to improve the execution and better meet the needs of its clients.
“The success of this strategy will depend on reducing bureaucracy and infrastructure in lower-growth countries and creating teams that can work across country borders, shifting more employees into direct client roles that support the company’s plans to deliver higher-value services and products,” according to the statement.
This moves eliminate the need for a traditional “pan-European management layer” to coordinate activity, the company said.
As a result, IBM will likely create a number of smaller, more flexible local operating units in Europe to increase direct client contact.
Big Blue has just completed the sale of its money-losing PC-making arm to Chinese group Lenovo for about $1.25 billion.