IBM set to lay off 5,000 in North America

Global services unit likely to bear brunt of cuts

IBM, which has the largest workforce in the US technology sector, is set to lay off about 5,000 staff in its North America operations. Employees are expected to be told of the cuts on Tuesday.

IBM declined to comment on the job losses, which were confirmed by a person familiar with the company’s plans.

The group has more than 100,000 staff on its payroll. IBM executives indicated recently that it would eliminate more jobs in the first half of 2009 than in the second half.

IBM, which which has been hit by slower technology spending in the US as the downturn bites, now earns around two-thirds of its revenue overseas and has been expanding its workforce in emerging markets including China and India.

Many of the cuts are likely to come in the global services division, which has been a consistent source of profits at Big Blue as the fortunes have fluctuated at other divisions.

IBM has been pushing to provide support contracts to clients from bases in India and other lower-cost countries.

Elsewhere, IBM is seeking new business. It is in talks to acquire Silicon Valley server and software company Sun Microsystems for about $6.5bn in cash, in what would be IBM’s largest takeover.

IBM recently announced that fourth-quarter profits rose 12 per cent to $4.43bn.

In the most recent quarter, global business services revenue was flat, at $4.7bn after currency adjustments.

The technology services business fared better, rising 3 per cent to $9.6bn. But the combined services business saw new short-term contract signings dip 1 per cent.

Once known mainly for its largest computers, IBM has steadily diversified, building up first software and then services and expanding beyond core technology expertise. It is the second largest software supplier in the world and the largest IT services firm.

That strategy has helped the company, and outsourcing to contract employees has risen by 20 per cent. Higher-priced consulting can be axed quickly by customers looking to save.

Total revenue in the fourth quarter declined 1 per cent to $27bn, again adjusting for currency shifts.

IBM shares fell 0.42 per cent to close at $97.95 on the New York Stock Exchange.

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