IBM cuts research jobs

By John G.Spooner, CNET News, 21 June, 2002 07:32

NEWS

IBM plans to eliminate a small number of jobs in its research division. In an effort to cut costs, the research arm of Big Blue will be scaling back some projects considered nonessential. An IBM representative declined to comment on the exact number, but sources say that roughly 160 jobs will disappear. IBM Research, where more than 3,000 employees work to hatch new ideas on everything from chips to wearable computers, is at the heart of the high-tech company, which lays claim to introducing the first magnetic hard disk, the Fortran language and Token Ring networking, among other accomplishments. More recently, it's been delving into carbon nanotubes and "pixie dust" storage technology. But IBM was hit hard by a first-quarter sales slowdown. That slowdown and glum expectations for the rest of the year have caused the company to whittle down costs across the board to stem revenue losses. In 2001, IBM spent about $5.9bn on research and development. "Research is all about making sure that we can help our business units speed innovation to the marketplace. We've had to take a hard look at some of our projects...so that we are aligned in a manner that helps us impact the parent company...and our business unit clients," IBM spokesman Tim Blair said. While some nonessential projects were eliminated, IBM continues to do exploratory work in areas such as semiconductors, he said. It will also continue to hire some new employees in some areas So far, IBM has eliminated close to 7,000 jobs overall, including about 1,000 server-related positions, 700 in the software group, 2,100 in Global Services and 1,500 jobs in the technology group, according to statistics compiled by Alliance@IBM, a group that represents IBM employees. IBM plans to take a $2bn to $2.5bn charge in the second quarter stemming from layoffs and costs related to transferring its hard-drive business to a joint venture. IBM started its first round of job cuts, inside the server group, in mid-May. A few days later, it followed with job cuts in its Global Services division. But the largest changes so far have come from inside the technology group, which includes semiconductor and hard-drive activities. A reorganisation of the group, announced earlier this month, included spinning off the hard-drive business in a joint venture with Hitachi and revamping the semiconductor business as well as eliminating about 1,500 jobs. IBM's agreement with Hitachi will combine the companies' hard-drive operations into a new, standalone company. Hitachi will own 70 percent of the new company but would also pay IBM for its hard-drive technology, the companies said. That deal alone could save IBM 25 cents per share per quarter, according to a research note issued by Goldman Sachs in April. The report estimated that IBM's hard-drive business lost between $600m and $700m before taxes in 2001, or about 25 cents per share, and would probably lose about the same in 2002. Many of the employees whose jobs were eliminated will be offered the chance to find new positions elsewhere in the company within 30 days. IBM has not acknowledged a target for the total number of job cuts, but analysts predict that IBM could end up letting go as many as 9,000 employees, while other estimates have ranged as high as 12,000 jobs worldwide.

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