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March 03, 2014

Big Blue Drops Pink Slips: 25 Percent Layoffs in Hardware Division

While much of the news around IBM (News - Alert) these days has focused on spending, particularly in terms of research and development, the extra costs incurred often have a way of dragging down other parts of the company. Since IBM's focus is changing, that in turn means an all-too-inevitable changing of the workforce, and IBM recently confirmed getting those changes started in the form of huge layoffs.

Said layoffs constitute as much as 25 percent of the Systems and Technology group, according to reports. IBM, however, wasn't issuing any official word as to which divisions would see the most impact, and to what extent said divisions would be impacted by the move. But it's worth noting that, according to reports, the Systems and Technology group is most often referred to as the “hardware” division, since its primary focus is on IBM servers. Since IBM employs over 400,000 people worldwide, a quarter of one division may be comparatively slim as cuts go, with IBM noting that its workforce has stayed at fairly static levels for the last three years. Plus, as IBM's Doug Shelton noted, there are other opportunities available within IBM itself, so much of those impacted by layoffs may be able to find other jobs within the company. IBM notes that it has around 3,000 job openings at any given time, so some migration may be on tap.

The cuts, however, are hitting nonetheless. The Burlington Free Press in Vermont notes 100 layoffs in an Essex Junction IBM plant, and the Poughkeepsie Journal in New York notes that IBM recently agreed to keep a minimum of 3,100 workers at its plant near there, yet the last official count of IBM workers in New York was closer to 7,000 than 3,100.

Given that just last month IBM sold the x86 server line to Lenovo (News - Alert) in a deal reportedly valued at $2.3 billion, some layoffs in this front make sense, especially when considered against the lion's share of issues. IBM is clearly looking in the cloud's direction for the future, and that's a direction that requires fewer servers overall. IBM's recent decisions have supported that view of the future nicely, especially given its recent expansion of Watson Group investments and similar moves in the cloud sector. Of course, servers will always be necessary and many of these servers are likely to have IBM involved at least peripherally, but with many businesses turning to hosted alternatives rather than systems located on the premises, that drops down the need for hardware a bit, at least for servers.

No one wants to talk layoffs, especially not in the still-fragile economy in which we all currently operate today. But it's not surprising to see IBM move just a little bit away from hardware in the increasingly cloud-based operating environment technology currently occupies. Still, there's hope for all those technology builders yet; it may be an increasingly cloud-based market, but the cloud still needs hardware on which to hang its metaphorical hat.

Edited by Cassandra Tucker

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