IBM layoffs expected

Speculation is rampant that IBM will lay off thousands of employees this quarter.

The Wall Street Journal Friday reported on its Web site that IBM will cut as many as 8,000 workers, or about 2.5 percent of its 320,000-strong work force, during the current quarter. The Journal cites as its source "a person familiar with the situation."

An IBM spokeswoman declined to comment on the report.

Predicting even more severe cuts is rumor site F***, which says IBM is preparing to lay off 10 percent of its U.S. workforce. (About 160,000 IBM employees are based in the U.S.) This rumor site, which tracks layoffs among dot-com and established tech companies, suggests the layoffs will occur May 23, with IBM Global Services taking the biggest hit.

Both reports follow this week's publication of a transcript of an address IBM President and CEO Sam Palmisano reportedly broadcast internally to employees on April 24. Robert Djurdjevic, an IBM watcher and president of Annex Research, claims to have obtained the transcript, which he distributed to Annex Research clients and posted on his Web site.

In the Djurdjevic transcript, Palmisano warns of slower-than-expected growth in the technology industry and at IBM, and says IBM needs to "pare back."

The transcript reads in part: "If you look at the first quarter results of IT companies, it's clear that the industry is not bouncing back this year. We can argue whether it's down again or flat or modestly up. But it's not going back to high single digits or teens. Then project that out in 2003 and you see it's not going to be growing at 10 percent or 11 percent next year either."

Palmisano continues: "So although we've got the strategy nailed, we need to fine tune some things. We were building up investments in the company that were based on the assumption that we would have huge robust growth that is not out there any more. And we (not) just have to stay where we are but pare back."

Word of potential layoffs comes after a disappointing quarter for IBM. For the period ending March 31, IBM reported a 12 percent revenue drop and 32 percent net income decline over the year-ago period.

(Additional reporting by George A. Chidi Jr., at the IDG News Service in Boston.)

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