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IBM to make Chinese job cuts

By Gao Yuan | China Daily | Updated: 2013-06-27 05:49

International Business Machines Corp, the US technology giant, is cutting jobs in China after a disappointing decline in earnings.

The world's biggest computer service provider said in an e-mailed reply to China Daily on Wednesday, from its China office, that "change is constant" in the technology industry and that "transformation is an essential feature of our business model".

It added: "Consequently, some level of workforce remix is a constant requirement for our business."

Although the company avoided giving any actual numbers of potential losses, a report on local Chinese news site tech.qq.com suggested the New York-based multinational is expected to axe at least 500 staff on the Chinese mainland.

The report added that affected staff can expect 14,000 yuan ($2,270) for every year of service as compensation. The US company did not refute the report.

The layoff plan comes after it reported lower-than-expected first quarter earnings in mid-April.

Total group revenues were down 5 percent to $23.4 billion. In emerging markets, including China, Brazil and Russia, they sank by 1 percent.

Company executives indicated earlier this month that IBM needed to cut its expenses in order to maintain its profits.

The company plans to cut 6,000 to 8,000 employees globally, at a cost of $1 billion, Bloomberg News reported, citing Laurence Balter, an analyst at Oracle Investment Research, about 2 percent of its total workforce of more than 434,000.

The job reductions will mainly focus on its overseas markets and are likely to be completed by the end of June, according to Lee Conrad, national organizer of Alliance@IBM, an independent workers union in the US.

Markets including Denmark, Italy and Germany have already cut roughly 1,000 staff in total, Bloomberg reported.

In Australia, one of its top Asia-Pacific markets, it may remove as many as 1,500 posts this year, according to The Sydney Morning Herald.

IBM has been pushing its software and IT consultancy businesses in China as hardware demand in the nation weakens.

China's ongoing urbanization process represents a massive opportunity for IBM in the post-PC era, according to Ernie Hu, a director of the software group at IBM Greater China.

The company is busy installing next-generation information collection and analysis systems for various local governments.

It also plans to shut non-core units to accelerate growth.

Revenues from its hardware business totaled $3.1 billion in the first quarter, a drop of 17 percent year-on-year.

In April, the world's second-largest personal computer maker Lenovo Group Ltd held talks with IBM on the possible acquisition of its x86 server business, but negotiations broke down when the sides failed to settle on price. IBM was reported to have been seeking $5 billion to $6 billion.

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