International Business Machines Corp is weighing a "sizable restructuring" after it surprised investors with a first-quarter profit that missed Wall Street estimates by US$0.05 a share.
The Wall Street Journal reported on its Web site on Thursday night that IBM plans to cut several thousand jobs in Europe, citing a person familiar with the matter. The company has told employees that it will close two sites in Germany and five in Sweden and transfer the work to lower-cost operations in Eastern Europe, the newspaper reported.
The company said results were hurt by difficulty closing transactions, increased pension expenses and a drop in sales in Western Europe and Japan.
"This quarter did not play out as we expected," said Mark Loughridge, the company's chief financial officer, who said the company has begun to address weaknesses in sales.
"A couple of those actions may require some sizable restructuring activities, primarily designed to move decision making closer to the customer," he said.
Details of the restructuring will come within the next three months, he said.
Analysts' estimates for the second half of the year "remain reasonable," Loughridge said.
The company's first-quarter net income rose 3 percent to US$1.40 billion, or US$0.84 per share, from US$1.36 billion, or US$0.79 per share, a year ago.
Earnings from continuing operations totaled US$1.41 billion, or US$0.85 per share, including stock-based compensation expenses.
Revenue grew 3.3 percent to US$22.91 billion from US$22.18 billion last year, driven by the weak US dollar. After adjusting for currency translations, sales increased only 1 percent.
IBM said the quarter was going well until the last two weeks in March, when revenue, especially from small transactions, dropped.
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