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ECommerceTimes.com

IBM Mum on Reported Layoffs

By Jeff Meisner
Jan 27, 2009 3:38 PM PT

Just a week after beating Wall Street expectations with a sterling earnings report, IBM is rumored to be laying off between 1,400 and 2,800 employees.

IBM Mum on Reported Layoffs

If true, IBM would be the latest on a long list of technology companies that have shed jobs in the past few weeks. Last week, Microsoft announced it would lay off 5,000 employees while Intel said it would lay off as many as 6,000 employees.

Aerospace giant Boeing also expects to reduce its workforce by 4,500 employees.

On Monday, several large companies joined the chorus of job cuts, including Sprint Nextel (8,000 jobs), Caterpillar (20,000 jobs) and Texas Instruments (3,400 jobs.)

Despite the rumors of impending layoffs, Big Blue's stock closed up .07 percent at US$91.66 per share on Tuesday.

The lack of a reaction by Wall Street may be an indication that any layoffs at IBM may have more to do with the company's habit of routinely pruning jobs from its 386,000-employee workforce than the year-long U.S. recession.

IBM officials could not be reached for comment.

Not a Significant Number of Cuts

On a percentage basis alone, 1,400 to 2,800 job cuts aren't significant, Colin Gillis, managing director of research at TheStreet.com, told the E-Commerce Times.

"It's almost standard churn," Gillis said. "It's got to be 5 percent of headcount to move the needle. That's the metric I use."

In most cases, IBM is open about when it cuts jobs. However, the company has been uncharacteristically quiet regarding the rumored layoffs.

"IBM posted a good quarter, and it's one of the few bright spots out there," Gillis said. "Maybe it just doesn't want to dilute that message. You don't want to be in the same boat as Microsoft or Yahoo or less-healthy peers."

Last week, IBM beat Wall Street estimates when it announced its fourth-quarter financial results.

The company reported $4.4 billion in earnings during the fourth quarter, up 12 percent compared with $4 billion in earnings during the same period in 2007. Fourth-quarter revenue was $27 billion, a 6 percent decrease from the fourth quarter of 2007.

For the full year of 2008, Big Blue reported $12.3 billion in earnings, up 18 percent compared with $10.4 billion in earnings in 2007. Total revenues were $103.6 billion, up 5 percent over 2007. IBM also generated $14.3 billion in cash in 2008.

The computing giant also said it expects to deliver $9.20 per share in earnings in 2009.

Demand for IBM Services Is High

Despite the massive falloff in demand among consumers for IT-related products and services, businesses still need what companies like IBM and HP have to offer, said Rob Enderle, principal analyst with the Enderle Group.

"IBM is actually doing better than most technology companies right now," Enderle told the E-Commerce Times. "IBM and HP are weathering the storm relatively well because they have broad product portfolios, they have big services units and they are multinational in scope."

IBM can take a lot of the outsourcing business away from competitors, and its IBM Global Services division is poised to provide much-needed integration services to companies undergoing consolidation, he said.

As for IBM's rumored layoffs, Enderle is in the same camp as TheStreet.com's Gillis.

"Given the numbers, this is probably more along the lines of general business realignment," Enderle said. "I think it's a case of IBM positioning itself as a firm that doesn't need to do layoffs, and it doesn't want this adjustment to affect that image."


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