IBM Lays Off 1,500; Takes $2B Charge

Wednesday, June 5th 2002, 12:00 am
By: News On 6

NEW YORK (AP) _ For the 150,000 U.S. employees of IBM Corp., the layoff jitters appear to be coming to an end.

After dismissing some 6,800 workers over the past three weeks _ including 1,500 on Tuesday _ IBM is almost done shrinking its work force.

``The vast majority of our colleagues who are affected by job actions have now been notified,'' IBM chief executive Samuel Palmisano wrote in a memo to IBM employees obtained by The Associated Press.

The company also announced it would take a pretax charge of a $2 billion to $2.5 billion in the current quarter to cover job cuts and other restructuring moves that aim to steady the technology behemoth, still languishing amid slow technology spending.

Most of the layoffs affect IBM's older lines of chip manufacturing _ especially its plant near Burlington, Vt., where almost 1,000 jobs were cut Tuesday and some chip production is being closed down, the company announced.

IBM let go 500 more employees Tuesday in Endicott and East Fishkill, N.Y.; Lowell, Mass; Raleigh, N.C.; Austin, Texas and Encinitas, Calif.

On Monday, the Armonk, N.Y.-based company said it would sell off its hard disk drive business, forming a manufacturing joint venture with Japan's Hitachi Ltd., which will control the new company after three years.

Also Tuesday, IBM said it was kicking off two new outsourcing businesses.

In one, IBM will make cutting-edge chips to order at its new $2.5 billion chip plant in East Fishkill, N.Y.

The other initiative will create an outsourced electronic device design business staffed by 500 IBM engineers who will be available for hire by outside electronics manufacturers, said Bill O'Leary, spokesman for IBM's Microelectronics Division.

The paring back of IBM's work force comes after the company's worst earnings quarter in more than a decade.

In Vermont, where IBM is the state's largest private employer, Gov. Howard Dean said the layoffs could cost the Vermont state budget alone $6 million to $8 million in tax revenues.

``This is very bad news,'' Dean said at a Montpelier news conference.

The cuts, though, weren't as drastic as had been feared. And no more cuts are anticipated.

``They are not planning another round,'' Dean said. ``They specifically said, 'This is not phase two of four phases,' or anything like that.''

Before the cuts, IBM employed about 8,000 in Vermont.

Since late last month, IBM has also eliminated about 350 jobs from its Endicott plant, which manufactures computer circuit boards and chip components.

After this latest round of cuts, the work force will drop to around 4,100. Last November, about 5,500 people worked in Endicott. The site hit a peak of nearly 12,000 jobs in the mid-1980s.

The company said the restructuring moves were aimed at boosting productivity.

``These actions we've announced today put us in a better, more competitive financial position for the second half, as well as 2003,'' said chief financial officer John Joyce in a conference call with analysts Tuesday.