IBM planning about 10,000 job cuts in Europe ahead of unit sale

A logo sits illumintated outside the IBM booth on day 2 of the GSMA Mobile World Congress 2019 on February 26, 2019 in Barcelona, Spain. The annual Mobile World Congress hosts some of the world's largest communications companies, with many unveiling their latest phones and wearables gadgets like foldable screens and the introduction of the 5G wireless networks. , Photo by David Ramos/Getty Images

Olivia Carville, Helene Fouquet and Daniele Lepido, Bloomberg News

Nov 25, 2020

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International Business Machines Corp. is planning to cut about 10,000 jobs in Europe in an attempt to lower costs at its slow-growth services unit and prepare the business for a spinoff.

The wide-ranging losses will affect about 20 per cent of staff in the region, according to people familiar with the matter. The U.K. and Germany are set to be most impacted, with cuts also planned in Poland, Slovakia, Italy and Belgium.

IBM announced the job cuts in Europe earlier in November during a meeting with European labour representatives, according to a union officer briefed on proceedings. The person asked not to be identified because the talks are private.

“Our staffing decisions are made to provide the best support to our customers in adopting an open hybrid cloud platform and AI capabilities,” an IBM spokeswoman said in an emailed statement. “We also continue to make significant investments in training and skills development for IBMers to best meet the needs of our customers.”

Hardest hit will be IBM’s legacy IT services business, which handles day-to-day infrastructure operations, such as managing client data centers and traditional information-technology support for installing, operating and repairing equipment.

IBM said in October it’s planning to spin off the business and focus on its new hybrid-cloud computing and artificial intelligence unit, which the company hopes will return it to revenue growth. IBM said it aims to complete the carve-out as a tax-free spinoff to IBM shareholders by the end of 2021.

“We’re taking structural actions to simplify and streamline our business,” said IBM Chief Financial Officer James Kavanaugh during the company’s third-quarter earnings call in October. “We expect the fourth-quarter charge to our operating results of about US$2.3 billion.”

Once an iconic blue-chip company, IBM’s star has faded over the years as its legacy in mainframe computing and IT services fell behind while newer technology firms like Amazon.com Inc. swooped in to dominate the emerging cloud-computing market.

The current round of job cuts should be completed by the end of the first-half of 2021, one of the people added.