International Business Machines Corp, the world's largest seller of computer services and hardware, plans to cut as much as 3 percent of its global workforce, or as many as 9,600 jobs, as sales slump, a person close to the company said.
The reductions will be made this quarter, the person said, confirming earlier speculation by analysts.
Talk of possible cuts emerged after IBM said on April 8 that first-quarter sales and profit fell more than analysts expected.
Sales at IBM, which has just under 320,000 workers worldwide, have missed forecasts by US$1 billion in the past two quarters. The person gave no indication where jobs will be cut.
"I expect modest cuts, a few percent," particularly in the US, where reductions are easier because of labor regulations, Merrill Lynch & Co analyst Steven Milunovich said in an interview yesterday. He rates IBM "neutral" and owns the shares.
The computer maker, whose shares are the worst performers in the 30-company Dow Jones Industrial Average this year, is feeling the impact of a slowdown in corporate spending. Chief Executive Officer Sam Palmisano last month cited "widespread deferrals" of purchases in all business segments. As the slump drags on, firings will be needed for IBM to meet sales and earnings forecasts, analysts said.
A 2 percent cut would mean about 6,400 jobs would be lost.
Earlier, the Wall Street Journal quoted an unidentified person as saying as many as 8,000 jobs would be cut, and the New York Times said cuts would likely total 9,000 workers, quoting an unidentified industry executive.
"IBM is going to need to be more aggressive going forward in lowering its cost structure to be able to meet the revised financial targets that are out there," said Prudential Securities Inc analyst Kimberly Alexy.
She has a "hold" rating on IBM and doesn't own the shares.
In the past five years, the IBM workforce has grown an average of 5.9 percent a year, while sales per employee declined 3.1 percent, according to Bloomberg data.
IBM spokeswoman Carol Makovich declined today to comment on possible firings. The Armonk, New York-based company's shares fell US$2.52 to US$79.93 yesterday. They've dropped 34 percent this year.
Analysts said cost-cutting is likely to be a prime topic when Palmisano appears at IBM's spring analyst meeting in New York Wednesday.
In November, IBM's Microelectronics unit fired 1,000 workers.
Last July, the company cut 1,000 Global Services jobs while saying headcount would grow for the year.
IBM's Global Services unit, with about 150,000 workers, will probably contribute the majority of any cuts, Tom Bittman, who follows IBM for technology-consulting firm Gartner Inc, said yesterday. The company's chipmaking unit isn't a likely target, he added. Other jobs may come out of divisions producing mainframe computers or among employees added when IBM purchased database-software maker Informix Corp, Bittman said.
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