Poor results mean IBM staff face axe

Changes are afoot at IBM, with “sizable restructuring activities” looming. Executives with the company said details of the changes will be released in the next three months, but industry watchers are predicting job cuts as well as an organisational overhaul.

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By  Peter Branton Published  May 1, 2005

Changes are afoot at IBM, with “sizable restructuring activities” looming. Executives with the company said details of the changes will be released in the next three months, but industry watchers are predicting job cuts as well as an organisational overhaul. Big Blue took the industry by surprise earlier this month by saying its first quarter financial results had missed expectations, with sales of its flagship mainframe boxes down 16%. Since IBM derives a lot of its revenue from selling software and services to its mainframe customers, this is a big concern for the company. Mark Loughbridge, IBM’s chief financial officer, admitted the quarter “did not play out as we expected,” although he said the company had already begun to take steps to address problems. “A couple of those actions may require some sizable restructuring activities, primarily designed to move decision making closer to the customer,” he said. IBM Middle East said no final decisions had been made, although the company would discuss any such decisions with “employees and employee representatives as required.” “IBM is looking at evolving client needs and changes in the way we operate so that we can meet those needs in the most efficient and productive manner possible — including re-examining our operations and organisational structure in countries around the world,” said an IBM Middle East spokesperson. Analyst firm Gartner Group said IBM customers should view this as “a temporary setback” for Big Blue, although it warned that the company is in a transition period from its traditional mainframe business to a business on demand model. “If IBM fails to execute well in its new focus areas, there will be more decline in revenues ahead,” it warned.

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