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Job cuts in IBM India hit the nation hard

Posted: 19 Feb 2014     Print Version  Bookmark and Share

Keywords:IBM  layoff  Lenovo  x86 server 

IBM has begun cutting jobs in India, described as one of the most massive lay-off drive by a technology firm. Poor Q4 results reported last month, marked by a 26 percent drop in hardware revenue, is suspected to be the main cause of layoffs.

Worldwide, IBM employs 430,000 people and reports said some 13,000 jobs are likely to be cut as the tech major performs a "global rebalancing" act, termed "resource action" or RA, that could save about $1 billion in costs.

Already, at one centre in Bangalore, IBM has asked about 40 people at its Systems Technology Group (STG) to leave, one person at the company told The Economic Times (ET). STG is often referred to as IBM's hardware division, according to the company's website.

According to the report, a person in Bangalore said on condition of anonymity that they were asked to surrender their official laptops and leave. "They were told STG business has been suffering financial woes. Employees across IBM India are extremely disgruntled. Several middle level executives have put in their papers in the last few weeks," the person added.

"STG Bangalore literally turned into a slaughter house today," Lee Conrad, national coordinator for Alliance@IBM, a union-backed workers group to The Economic Times in an email. "Several employees were called to a meeting and RA'd... and they were asked to vacate premises immediately. Severance package was on an average three months basic component of salary, which is like six weeks full pay," Conrad said.

RA refers to 'resource action' that IBM's managers at various units were asked to prepare for, ahead of the job cuts, according to media reports in the US. "People broke down after seeing the inhuman treatment. Laptops along with the cases were confiscated, so several employees were seen crying and exiting building carrying and balancing their personal belongings with their two hands," according to the email.

Unofficial estimates put the sacking number at about 1,000 in Bangalore alone.

According to the union, job cuts in the STG are happening because of a drop in profits and IBM's drive for $20 earnings per share. IBM has set itself this earnings target by 2015, but analysts have questioned if this is achievable, especially after the company's latest results.

Although IBM has not confirmed the layoffs sources confirmed that hundreds of IBM staffers at its Bangalore office were asked to leave suddenly. Some of them, it is said, were given just a couple of hours notice and asked to leave behind their laptops and vacate the premises pronto, said the DNA newspaper.

Last month IBM had agreed to sell its low-end server business for $2.3 billion to Lenovo, which had already bought company's PC business. At STG, "even people with very high rating were asked to leave. Two weeks ago they were told there would be no salary hikes this year," the report added.

IBM reported a 5 percent drop in revenue in the December quarter versus the year-earlier period and analysts attribute a slightly higher-than-expected earnings per share for the quarter to measures including share buybacks and not growth in business. "We are hearing up to 15,000 cuts worldwide in the first quarter. We expect job cuts in the US February 26." Conrad said.

In India, IBM has a head count of over 130,000, its largest presence outside the US.

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