IBM to axe 13,000 jobs

THE world's biggest computer group, IBM, is to cut up to 13,000 jobs in a cost cutting move that targets Europe, it confirmed last night. The group said the 4% reduction in the workforce, revealed by This is Money last Sunday, would slash bureaucracy and scale back in slower-growth countries.

IBM employs about 25,000 people in the UK and has 100,000 staff across Europe. The company has a major centre in Greenock, Scotland, where it employs 2,800 people.

The majority of the 10,000 to 13,000 redundancies are planned for Europe, where the company began cutting jobs before it announced disappointing first-quarter earnings last month.Analysts had predicted the cuts, which will affect up 4% of IBM's 329,000-strong workforce.

Chief financial officer Mark Loughridge warned in April that the company planned a 'sizeable restructuring'.

IBM said it would run fewer services offices worldwide and reducethe number of European managers. A company statement said: 'As a result, IBM will create a number of smaller, more flexible local operating units in Europe to increase direct client contact.'

The restructuring will lead to a second-quarter pre-tax charge of up to $1.7bn (£895m). UBS analyst Ben Reitzes in New York said the job cuts could result in up to 50 cents a share in after-tax savings. That amounts to 10% of the profit analysts expect from IBM in 2005. IBM shares rose more than 1% in after-hours trading to $78.00, up 92 cents.

Bob Moffat, IBM's senior vice president of supply chain integration, declined to specify which countries or office locations were targeted for cutbacks.

Mark Herskovitz, manager of Dreyfus' Premier Technology Growth fund, which manages $2bn in assets, said the cuts are a sign that IBM is trying to solve its own troubles, not a symptom of a wider slowdown in the technology sector.

In the late 1980s and early 1990s the company faced a crisis in its core mainframe computer business and cut its work force by more than half.From a peak of 405,000 employees in 1985, the workforce bottomed at 219,000 in 1994.

IBM, based in Armonk, New York, completed the sale of its PC business to Lenovo Group of China, at the weekend resulting in the transfer of 10,000 employees to Lenovo's payroll.

IBM spokesman John Bukovinsky said most of the European job cuts would be voluntary and that talks had begun with workers' councils and other organisations on the timing. 'In Europe, we expect to reach most of the objectives through voluntary programmes,' Bukovinsky said. 'But I don't know how they are going to get 10,000 people to quit.'