IBM resorts to layoffs to keep tabs on costs
With IBM’s (IBM) recent acquisition of Bluewolf Group, IBM has announced ten acquisitions in the first three months of 2016. IBM continues to follow acquisition spree in an effort to boost its presence in the cloud space as well as to seek new avenues of revenue growth. But in the past 15 quarters, including recent fiscal 4Q15, IBM has failed to report any revenue growth.
To curtail its costs, IBM is once again taking to layoffs. But with so many acquisitions happening at such a rapid pace, this should be expected. In March 2016, IBM announced job cuts in the US, Canada, Europe, and Australia.
According to Germany’s Berlin Morning Post report (citing Verdi, a local trade union), IBM intends to cut ~1,000 German jobs by March 2017. As of early April, IBM had 16,500 employees in Germany (EWG), but this is compared to 21,100 in 2009.
If we consider estimates from Bernstein, a financial analytics firm, approximately 14,000 IBM employees will lose their jobs in fiscal 2016. Bernstein further stated that in past ten years, IBM has saved ~$6.8 billion from “workforce rebalancing,” by axing 96,986 jobs.
Tech players’ cost structure and layoff connection
Technology companies often resort to layoffs to keep control of costs. Symantec (SYMC), for example, in its recent fiscal quarter, announced that it intends to save ~$400 million per year by the end of fiscal 2018—all by means of job cuts.
The above table shows the historic numbers for US tech job cuts as reported by Challenger, Gray & Christmas, an employment consulting firm. In 2015, the tech sector accounted for 13% of the 598,510 job cuts. Although job cuts in the tech space fell in 2015, announced job cuts by companies like Hewlett-Packard (HPQ), Microsoft (MSFT), Intel (INTC), and Unisys were up by 5%, from 59,528 in 2014 to 62,191 in 2015.
Now let’s analyze IBM’s recent stock performance and discuss how this has affected analyst ratings.