International Business Machines Corp. is planning to cut about 10,000 jobs in Europe in an attempt to lower costs at its slow-growth services unit and prepare the business for a spinoff.
The wide-ranging losses will affect about 20% of staff in the region, according to people familiar with the matter. The U.K. and Germany are set to be most impacted, with cuts also planned in Poland, Slovakia, Italy and Belgium.
IBM announced the job cuts in Europe earlier in November during a meeting with European labor representatives, according to a union officer briefed on proceedings. The person asked not to be identified because the talks are private. IBM shares fell 1.6% at 9:37 a.m. in New York. They’ve declined 8.6% this year.
“Our staffing decisions are made to provide the best support to our customers in adopting an open hybrid cloud platform and AI capabilities,” an IBM spokeswoman said in an emailed statement. “We also continue to make significant investments in training and skills development for IBMers to best meet the needs of our customers.”
Hardest hit will be IBM’s legacy IT services business, which handles day-to-day infrastructure operations, such as managing client data centers and traditional information-technology support for installing, operating and repairing equipment.
IBM said in October it’s planning to spin off the business and focus on its new hybrid-cloud computing and artificial intelligence unit, which the company hopes will return it to revenue growth. IBM said it aims to complete the carve-out as a tax-free spinoff to IBM shareholders by the end of 2021.
“We’re taking structural actions to simplify and streamline our business,” said IBM Chief Financial Officer James Kavanaugh during the company’s third-quarter earnings call in October. “We expect the fourth-quarter charge to our operating results of about $2.3 billion.”
Once an iconic blue-chip company, IBM’s star has faded over the years as its legacy in mainframe computing and IT services fell behind while newer technology firms like Amazon.com Inc. swooped in to dominate the emerging cloud-computing market.
IBM was already cutting jobs earlier this year, although the company wouldn’t say how many positions were being eliminated. The company has traditionally declined to disclose the numbers of job cuts for decades, with arguably one exception in 1993 when Lou Gerstner, a CEO hired from outside the company, announced 60,000 dismissals.
The spin-off of its services unit is the first big move by Chief Executive Officer Arvind Krishna, who took over from Ginni Rometty in April and has been pushing to revive growth after almost a decade of shrinking revenue. Krishna earlier this year cut thousands of jobs as he began reshaping the business.
The current round of job cuts should be completed by the end of the first-half of 2021, one of the people added.