International Business Machines Corp. will cull over a quarter of its global workforce as early as next week, reports Forbes.
Robert Cringely, a contributor at Forbes, believes Big Blue will undertake the layoffs through a massive transformation project code named “Project Chrome”.
IBM revenue declined for eleventh consecutive quarter
As reported by ValueWalk last week, IBM posted its fourth quarter fiscal 2014 earnings report revealing another weak quarter in terms of revenue growth. Its revenue of $24.1 billion fell short of the analyst consensus estimate of $24.77 billion. IBM’s earnings came in at $5.81 per share, down 4% from last year.
According to Cringely of Forbes, following its eleventh quarter of declining revenue, IBM’s Project Chrome to be unveiled next week will hit many of the firm’s worldwide services operations. He believes one in four IBMers will be gone by the end of February. He says out that in the U.S., mainframe and storage talent will experience deep cuts.
IBM’s “Project Chrome” is intended to reorganize the company. Cringely notes Project Chrome appears to be a pure accounting resource action, driven by the executive suite and designed to make IBM’s financials look better for the next few quarters. He believes the size of Project Chrome cuts indicate IBM is trying to get three or four quarters ahead of the expected business losses.
Layoff will have wider ramifications
Cringely discussed the various ramifications of the reorganization, and the causes for it, particularly dwindling hardware sales and a lackluster services revenue stream which leaves the company looking for answers.
Ben Kepes, another contributor from Forbes, points out that though IBM’s cloud business is actually a net positive, it is weighed down by the rest of the corporate baggage. He points out that enterprises choosing IBM for cloud generally buy into the “IBM is a safe bet” story and succumb to the “no one was ever fired for buying IBM” line. However, he notes these same customers will take a very dim view of such massive layoffs and the ensuing problems that they will cause.
IBM’s reported layoff figure is much greater than the 10,000 and 1,700 layoffs in 2013. In 1993, IBM underwent a similar layoff program when it sacked around 60,000 employees.
IBM provided weak guidance for the fiscal year 2015 that resulted in a drop in analyst estimates. IBM’s consensus EPS expectations for the year currently range between $15.75-$16.50.