Report: IBM's merger with PwC means layoffs

A published report says IBM's acquisition of PwC Consulting is likely to result in layoffs, but the companies say it's too early to say whether there will be any cuts as a result of the acquisition.

An article in Tuesday's Wall Street Journal quoting people familiar with IBM's plans reported that about 4,000 people will be laid off, but it's not known how many will come from PwC and how many will come from Big Blue's consulting group.

IBM has no comment on the report, but the company is looking at any duplication that might exist as it examines how best to integrate the organizations, spokeswoman Nancy Kaplan said.

Sehra Eusufzai, a spokeswoman for PwC Consulting, also declined to comment on the projected 4,000 layoffs, saying the impact of the acquisition on employment hasn't been determined. But Eusufzai said the company has laid people off over the past year due to the decline in the economy, clients' scaling back of IT projects and new legal restraints on auditing companies that also provided consulting.

She could not provide the exact number of layoffs, but said PwC Consulting employed between 34,000 and 35,000 people a year ago and now employs about 30,000.

"These were adjustments made to the business long before the acquisition," she said.

If cuts do result from the acquisition, they are unlikely to come from PwC Consulting employees who deal directly with clients, said Michele Cantara, principal analyst in Gartner Inc.'s consulting and systems integration services group.

"It seems to me they are rationalizing resources based on skill and account relationships," Cantara said. "Assuming this is true it won't be PwC consulting types, people in client-facing roles, because that's what they want to buy."

An employee with PwC Consulting in New York who asked not to be identified said the company has been laying off employees during the last two weeks. The employee didn't know the exact number of layoffs, but described it as "fairly large" and said the layoffs included middle management.

"A lot of people who got laid off sent e-mails companywide to sort of let people know how many people were getting laid off," the PwC employee said Tuesday. "In a space of three days I got over 30 e-mails. The higher-ups have been trying to ignore layoffs are happening. If it weren't for some partners, we wouldn't know a thing."

IBM announced plans to buy PwC Consulting for US$3.5 billion in cash and stock on July 30. [See "IBM to buy PwC Consulting for $3.5 billion," July 30.] IBM plans to combine PwC Consulting with IBM Global Services' Business Innovation Services division to create a new unit.

When the acquisition was announced, IBM Global Services Vice President of Strategy Ralph Martino said he didn't expect "anything major" when asked whether the acquisition might prompt layoffs.

The acquisition remains subject to regulatory approval and the approval of regional PwC companies through partner votes. Kaplan said approval is expected by the end of September.

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