IBM Layoffs Begin In The U.S. And Canada

March 3, 2014 Timothy Prickett Morgan

Several weeks ago, IBM started a round of layoffs that it hopes to have completed by the end of the first quarter and from which it will book approximately $1 billion in charges. The next round of layoffs were expected to start on February 26, last Wednesday, but the rumors are that CEO Ginni Rometty was giving a big speech at the Mobile World Congress to talk about creating mobile Watson applications and the PR machine did not want to step on that story. So layoffs started in the United States and Canada on February 27.

Under normal circumstances, as each employee is subject to a “resource action,” as a layoff is called in the IBM lingo, the paperwork has the location of each employee their titles, and their age. Many people who are let go from IBM share this paperwork with the Alliance@IBM, which under the effort of former IBMer Lee Conrad, who hails from the Endicott, New York, founding grounds of Big Blue, has been trying to unionize IBM workers for longer than I can remember. (It seems to be a thankless job, like being a co-op board president–something I know a thing or two about–but Conrad keeps at it in Local 1701 of the Communications Workers of America union.) Using these submitted documents, Conrad could track the layoffs by company division and group, which was useful. IBM has stopped putting this data on the paperwork because of privacy concerns, according to a report from WRAL TechWire down in North Carolina.

As of Friday evening, all I can tell you is that Conrad estimates that 150 jobs were removed from IBM’s chip plant in Essex Junction, Vermont, and another 10 to 15 were let go in Endicott, which is just a little west of Binghamton and which is where the company was headquartered for many years before coming to New York City and then Armonk. Other cuts have been made in Rochester, Minnesota; Poughkeepsie, New York; Research Triangle Park, North Carolina; and Tucson, Arizona. These all have some link to Systems and Technology Group, which has been bleeding losses in recent quarters. Layoffs were done in Dubuque, Iowa; Columbia, Missouri; Tulsa, Oklahoma; and Littleton, Massachusetts. There were scattered reports of job cuts in East Fishkill, where IBM makes its Power and System z processors, among other things, and also at the TJ Watson Research Center in Yorktown Heights. (These facilities are both located in New York.)

No one knows for sure how many jobs IBM plans to cut, and the estimates vary wildly from anywhere from several thousand to as many as 13,000 to 15,000. There were thousands of cuts rumored a few weeks ago in India, and presumably the pay is a lot lower there and therefore the layoff numbers could be very high. There was talk it was as high as 6,000 layoffs, but with a workforce in India that is rumored to have be over 100,000 people in it, this is not a huge amount. IBM has well under 100,000 employees in the United States these days, although how many is unclear because the company has not provided a breakdown of workers by country for many years.

The one place where the layoffs are being contained, somewhat, is in New York. On February 24, as part of an investment in high-tech research and manufacturing in the Empire State, Governor Andrew Cuomo announced an arrangement with IBM that will guarantee the company keeps at least 3,100 high-tech workers in the state through 2016. The agreement was between IBM, New York State, and the State University of New York College Nanoscale Science and Engineering, which is located in the state capitol of Albany. The deal calls for IBM to have 2,350 high-tech jobs in the Hudson Valley and another 750 in semiconductor plants and research facilities. IBM has also agreed to create another 500 jobs in the Buffalo IT Innovation and Commercialization Hub that Cuomo announced on February 27, the same day the layoffs started hitting. The state is kicking in $55 million to create this facility, and IBM will be the first occupant. New York is also kicking in $225 million and private investors are putting in another $1.5 billion for LED lighting and solar cell manufacturing and research facilities in Buffalo. All of that money is mostly for facilities and equipment and will only create hundreds of jobs.

No one said anything about the agreements between New York State and IBM having iron-clad clauses that would keep Big Blue making chips in New York. Rumors have been going around that IBM is looking to sell off its chip making business, which includes the Essex Junction and East Fishkill facilities. IBM no doubt is able to sell its chip business if it needs to, and if it does, those jobs will have to stay in New York anyway. It is not like a wafer baker is portable, after all. GlobalFoundries has the riches of Abu Dhabi behind it and already runs a state-of-the-art fab up the Hudson in Malta, New York. That is the easiest sale to make for Big Blue, and with Rometty needing to make her $20 per share operating earnings target for the end of 2015, I have little doubt it is for sale and that IBM wants to get out of the chip making business. It may even want to get rid of chip research, and in fact, it may have to sell of a chunk of IBM Research along with its patent portfolio to get a deal done. This could be worth a lot more than one ancient fab and a new one. But selling off that chip research would probably mean IBM loses its prestige in the IT racket and its annual patent king status.