IBM (NYSE: IBM) job cuts that the computer-services company labels as a “workforce rebalancing” cost $1 billion that the company recorded in the second quarter.
Armonk, N.Y.-based Big Blue, which at one point employed an estimated 10,000 at its Research Triangle Park campus, disclosed the charge during the release of its second quarter financial results. IBM in the second quarter continued the rebalancing effort it started at the end of the first quarter. The number of IBM jobs cut in North America now tops 3,300 across numerous business units, according to Alliance@IBM, a group trying to unionize IBM workers.
In a conference call with analysts to discuss financial results, IBM’s CFO Mark Loughridge described the rebalancing as an effort to better position the company and adjust the workforce to best suit the company’s business. While IBM constantly adjusts its workforce to meet customer demand, the cost of these job cuts was particularly pronounced in the second quarter. For comparison, a year ago the company spent just $150 million on such rebalancing.
But Loughridge reiterated that the moves better position the company for future growth.
“We’ll see some of the benefit from the rebalancing activity in the second half,” he said.
Loughridge gave no indication of additional job cuts on the scale of the second quarter layoffs. But Alliance@IBM National Coordinator Lee Conrad, who listened to the conference call, said he expects smaller and individual cuts to take place “under the radar.” Conrad said that IBM’s rebalancing means “cutting jobs here and moving them overseas, or just cutting jobs and having co-workers pick up the extra work.”
IBM reported $24.9 billion in second quarter revenue, down 3 percent from the second quarter of 2012. Sales in Europe, the Middle East and Africa were flat at $7.8 billion. In Asia-Pacific, revenue was down 8 percent to $5.8 billion and down 3 percent in the Americas to $10.7 billion. But Loughridge drew distinctions between geographic markets. While sales in the United States were down 4 percent, IBM saw strong gains in Latin America, particularly in Brazil. And while overall sales declined in the Asia-Pacific region, IBM saw its third consecutive quarter of revenue growth in Japan.
Net income for the quarter was $3.2 billion, down 17 percent from the $3.9 billion in the year ago period. Operating net income for the quarter including the workforce rebalancing charges was $3.6 billion. Excluding the workforce rebalancing, operating net income was $4.3 billion, a 3 percent increase.
IBM had said in April that the costs of the second quarter workforce rebalancing would be offset by a large divestiture of the company’s business. Loughridge gave no additional details of the business unit that would be sold sold off. Earlier this year IBM was reportedly in talks to sell part of its server business to Lenovo but those talks broke down.
On Wednesday, Loughridge told analysts that the company is still in “active discussions” for a divestiture but a deal is not likely to close in 2013.
