After posting a surprisingly strong fourth quarter, IBM Corp. told analysts it does not expect to ratchet up job cuts this year beyond the attrition it pushes through the company each year as it juggles business lines and assesses worker performance, though Big Blue is accelerating that process to help its bottom line this quarter and next.
Armonk-based IBM gave an upbeat outlook for 2009 despite a drop in sales in the fourth quarter. IBM earned $4.4 billion during the quarter, up 12 percent from a year ago even as revenue fell 6 percent to $27 billion, with much of the decline attributed to the impact of a stronger U.S. dollar.
For the full year in 2008, IBM tallied a $12.3 billion profit, likewise up 12 percent, on a 5 percent boost in revenue to a record $103.6 billion.
In the days leading up to the fourth quarter results, employees had expressed fears of widespread layoffs on a chat board maintained by the IBM Employees Union CWA Local 1701. IBM is the largest employer in the lower Hudson Valley, with more than 19,000 employees locally at last count.
Even as it cut jobs in the fourth quarter, with its Japan operations the focus, in mid-January IBM announced it will build a new technology service center in Dubuque, Iowa, that will employ up to 1,300 people, accepting up to $53 million in incentives for the project. In December 2008, IBM outsourced its logistics operations to Paris-based Geodis, which will impact its restructuring costs in the first quarter.
In addition to such strategic actions, the company typically sheds workers on a continual basis that it deems relatively low performers in their jobs.
“Though we expect the work force rebalancing to be in kind of the normal range that we run every year, say $300 million to $400 million (in restructuring costs), I do think that it”™s going to be more front-end skewed, and that front-end skewing will impact the first quarter to some degree,” said Mark Loughridge, chief financial officer of IBM, in a conference call with analysts last week.
IBM is hardly out of the woods ”“ according to Citi analyst Richard Gardner, a lot of investors fear a sharp falloff in 2009 as corporate budgets get reset for new fiscal years and as customers become increasingly concerned about economic conditions this year.
Mindful of the high-tech recession of 2002, IBM has transformed its business model this decade, according to Loughridge, dumping products in highly competitive sectors like personal computers and printers, and acquiring software companies that glue together applications and information in corporations.
“That recession was more about overcapacity, which is not the case today, and the IT industry in general is much different now,” Loughridge said. “But more importantly, IBM is a fundamentally different company. Today, we have much less dependence on the cyclical and commoditizing products that are most affected in the downturn. In services, we have a much more flexible labor model that can adapt to changing market environments, and much of our software is embedded in the fabric of our clients”™ IT infrastructures.”
Even as the company has emphasized services this decade, however, Big Blue last year shattered the U.S. patent record, with its some 4,200 patents nearly 700 more than Samsung, and double the number of Microsoft Corp. It was the 16th straight year IBM has led in U.S. patent awards.
