It is raining job cuts in US tech industry. Two marque tech icons – Motorola and IBM – have this week announced further pruning of jobs.
While Motorola would cut 4,000 jobs, IBM has said it has already laid off an additional 1,570 employees in its computer services business in the US. This, the Big Blue said, is part of a plan to trim costs in the unit.
Motorola, which had already planned to complete 3,500 job reductions by June 30, forecast restructuring charges of about $300 million, or about 8 cents per share, over the rest of 2007 as a result of the latest lay-offs.
The company, which has been losing market share to rivals such as market leader Nokia due to a lack of advanced phones and tough price competition, had said in April that it would announce additional cost-cutting plans by June.
The latest planned cuts at the company, which had 66,000 employees at the end of 2006, will be made by the end of the year, according to Motorola, which did not provide specifics on the break-down of the lay-offs.
But while the job cuts will help with costs, Oppenheimer analyst Lawrence Harris said Motorola, which has been criticised for failing produce a hit to follow its popular Razr phone, would need better phone models to impress investors.
This week’s lay-offs bring to about 3,700 the number of jobs IBM has cut this year in its services unit, which accounts for about half of total revenue but whose profit lags the company’s software business.
Earlier this month, IBM eliminated about 1,300 jobs in the US services business. The rest were cut in the first quarter. IBM, which had 355,766 employees at the end of 2006, said on April 17 it was cutting costs in the United States amid weaker US demand for its services and products in the first quarter. IBM spokesman John Bukovinsky said he did not have information showing where this week’s job cuts took place.
IBM, based in Armonk, New York, is trying to boost profitability in services by replacing some employees with software that can be replicated from one contract to another. This year’s job cuts occurred as customers shortened or otherwise cut services contracts, Bukovinsky said.
“The services business is tremendously cyclical,” he said. “This is basically the result of (clients) looking over longer-term contracts and deciding they don’t want the work done, or deciding they can do the work with fewer people.”
Bukovinsky said the jobs were not being shifted to lower-cost labor markets such as India. IBM in the first quarter paid about $55 million for job cuts.