IBM Cuts 10,000 Jobs From Its European Services Business Ahead Of Planned Spinoff

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by Tyler Durden
Wednesday, Nov 25, 2020 - 07:46 AM

Fresh off reporting its lowest revenue figure this century and an alarming slowdown in its cloud-computing business, IBM is planning to cut about 10k jobs from its European operations - roughly 20% of the company's total head count in Europe - as "Big Blue" prepares to sell its services unit.

The wide-ranging losses will affect about 20% of staff in the region, according to people familiar with the matter. Workers in the UK and Germany will see the bulk of the cuts, though employees in Poland, Slovakia, Italy and Belgium will also be impacted. The cuts should be finished by the end of the first half of 2021.

IBM announced the job cuts in Europe earlier in November during a meeting with European union leaders.

"Our staffing decisions are made to provide the best support to our customers in adopting an open hybrid cloud platform and AI capabilities," an IBM spokeswoman said in an emailed statement. "We also continue to make significant investments in training and skills development for IBMers to best meet the needs of our customers."

In a sign of just how dominant cloud-computing is becoming, the biggest cuts will impact Big Blue's European IT services business, which is responsible for managing clients' servers and data centers. As the pool of customers who rely on the old-school servers dwindles, IBM has said it plans to spin off the services business as part of a pivot toward cloud computing and AI. But rather than selling the business, IBM is planning to carve it out as a "tax-free spinoff" for IBM shareholders by the end of next year.

"We’re taking structural actions to simplify and streamline our business," said IBM Chief Financial Officer James Kavanaugh during the company’s Q3 earnings call last month. “We expect the fourth-quarter charge to our operating results of about $2.3 billion."

How IBM handles its legacy services business will be of great interest to its tech rivals. Back in 2005, the company offloaded its laptop hardware business to Lenovo. But as those old server farms become increasingly rare as the shift to cloud computing continues, there's still money to be made servicing those older products.