IBM furloughs US staff as server demand eases
NEW YORK: International Business Machines Corp (IBM) said it’s requiring the majority of US employees in its hardware unit to take a week off with reduced pay, cutting costs as demand slows for products such as servers.
US hardware workers, including those involved in development and procurement, will take a furlough week with one-third pay starting on either August 24 or 31, said Jay Cadmus, a spokesman for the systems and technology group. Executives in the division will take no pay during the week.
The world’s biggest computer-services company is trimming expenses to preserve profit margins as hardware revenue continues to decline. Sales in the unit, which also includes storage devices and microelectronics, slid 12 per cent in the second quarter from a year earlier to US$3.76 billion.
“We looked at a variety of things that we could do, and in lieu of other options considered, this the best approach in the balance of the organisation,” Cadmus said. The company has done furloughs before, he added.
In the second quarter, IBM spent US$1 billion to restructure its workforce, cutting more than 3,300 employees in the US and Canada, according to AllianceIBM, an employee group. IBM doesn’t disclose the number of employees by country or by division. The company’s total workforce was 434,246 as of December 31. Hardware accounted for 16 per cent of IBM’s US$104.5 billion in 2012 revenue.
“IBM continues to punish workers with job cuts, furloughs and pay cuts while the company spends billions to buy back stock and inflate the price,” said Lee Conrad, coordinator of AllianceIBM. “There appears to be no sacrifice at the top.”
IBM spent US$3.6 billion on share repurchases last quarter. Its shares are up 2.1 per cent this year, closing little changed on August 5 at US$195.50. The company raised its forecast last month for 2013 profits to at least US$16.90 a share, up from US$16.70, excluding the US$1 billion restructuring charge.
Chief executive officer Ginni Rometty shook up the management of the hardware division in April, replacing Rod Adkins with Tom Rosamilia, who had been overseeing corporate strategy.
IBM was in talks earlier this year to sell parts of its server division to Lenovo Group, sources said. The negotiations broke down in early May due to disagreements over price, one person said.