IBM prepares job cuts far exceeding 25,000 already announced Analyst sees 40,000 or more layoffs in '93

February 11, 1993|By New York Times News Service

With its business continuing to weaken, IBM is preparing to cut its work force this year by far more than the 25,000 people it had previously announced, analysts and consultants close to the troubled computer maker say.

An IBM spokesman denied that the company had begun considering plans for broader cuts in its work force.

"We're still working off the 25,000 umbrella, and that's still the plan of record," said the spokesman, James Ruderman.

But in an advisory sent to clients yesterday, Daniel Mandresh, an analyst for Merrill Lynch & Co., said he expected that International Business Machines Corp. would soon "reveal a plan to remove 40,000 or more people in 1993." The extra cutbacks, headded, could require a special charge against earnings of bTC roughly $1 billion to pay for financial incentives to prod people to leave the company.

Other analysts and consultants said they had also been told privately by IBM officials in the past few days that more job cuts were being planned. A big target of job reductions, they said, will be the marketing and support staff, in an effort to trim IBM's sales and administration expenses.

One consultant, who insisted that he not be identified, said he was told that an internal announcement to managers would be made at the start of next week, that the people whose jobs were earmarked for elimination would be identified by the start of March and that by mid-April those workers would have to accept the early-retirement incentives or face the risk of being laid off.

IBM, which has had a long-standing no-layoff policy, has cut its work force from a peak of 407,000 people in 1986 to 300,000 by the end of last year through yearly programs of early-retirement packages. But the company has served notice that it could be forced to abandon its no-layoff policy, depending on business conditions.

IBM reported a loss of $4.97 billion last year, with much of that attributable to special charges to trim the payroll and shed assets.

Mr. Ruderman of IBM said that as the year progressed, the company would take whatever steps it needed to try to keep its costs in line with business demand. He also suggested that reports from within the company of additional cutbacks might result from confusion, as some IBM employees mistakenly concluded that the cutback program previously announced but only now going into effect was yet another round of job cutting.

But several consultants said that new work-force reductions were indeed pending. Unlike Mr. Mandresh of Merrill Lynch, however, they did not make specific projections about the number. Precise figures, they said, would be difficult to predict because under IBM's new decentralized management structure the heads of different operations, like mainframes, personal computers, software and others, are given financial targets and told to do what was necessary to achieve the stated goals.

"But clearly, the company is going to have to cut more people than it planned, and much of it will come from marketing and sales," said Sam Albert, a consultant in Scarsdale, N.Y., who is a former IBM official.

IBM's plans to accelerate its cutback program this year, said Mr. Mandresh of Merrill Lynch, has been forced by the softness in several of its key businesses, like mainframes, mini-computers and large-disk storage. "The sense is that it's better to bite the bullet now," Mr. Mandresh said.

In his advisory to clients, Mr. Mandresh estimated that IBM's revenues would fall 14.5 percent, to $12 billion, in the first quarter, and that it would lose $283 million, or 50 cents a share. The loss estimate was double his previous estimate.

The price of IBM shares declined yesterday by $1.125, to $52.25, on the New York Stock Exchange. Trading was heavy, with 3.6 million shares changing hands.

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