IBM details job cut plans

IBM has been detailing its plans for redundancies in its European operations.

Speaking at a live webcast Mark Loughridge, chief financial officer at IBM, said that the job cuts have been under examination since the first-quarter results on 14 April.

Weak demand in the European market has been blamed for the cuts, over two thirds of which will fall in Germany, the UK, Italy and France.

"There is no longer a need for a pan-European management level," explained Loughridge.

"We are pushing more decision making responsibility down through the management structure to client-facing teams. Changing our operating model enables us to make high-value offerings and overcome competitive threats."

Loughridge said that resources would be shifted from low-growth to high-growth areas and would consolidate existing service centres to a smaller number of "centres of excellence" that would reduce costs.

He stressed that territories, coverage by representatives and client relationships would not be affected.

IBM will attempt to make all redundancies voluntary in Europe, but compulsory cuts may be necessary, particularly in IBM centres outside the EU.

The corporate restructuring will begin on 4 July, and savings should be seen by the end of the year, according to Loughridge.

Ian Wesley, research director at analyst firm Ovum, said: "It has become increasingly clear to many US companies that high labour costs and a position on the western fringe of Europe do not make France the ideal place for a European headquarters.

"So the whole IBM EMEA Paris-based organisation has been living on borrowed time, and this restructuring sounds its death knell."

IBM said that the deal with Lenovo to sell its PC business was vital as it extricated the company from a volatile, low-margin business and allowed it to concentrate on high-value consultancy services.