Time for IBM to shrink — again
Something’s afoot at Big Blue. The question is whether it’s monumental or just significant.
Influential tech blogger Robert Cringely wrote recently that IBM (IBM) was preparing to lay off 26% of its workforce as part of a huge restructuring effort called Project Chrome. Since IBM employs about 430,000 people worldwide, that would amount to an astonishing 112,000 pink slips. No U.S. company has ever laid off that many people. The closest was a massive downsizing in 1993 by… IBM, which cost 60,000 people their jobs. During the near-depression in 2008 and 2009, the worst firings tallied 50,000 jobs at Citigroup (C) and 47,000 at General Motors (GM).
IBM shot down Cringely’s report, calling it “ridiculous” and “baseless.” The company did say in its latest earnings report that it’s taking a $600 million charge for “workforce rebalancing,” but that’s likely to involve “several thousand people,” not a six-digit sum. Still, IBM’s revenue has fallen for three years in a row as it struggles to adapt to cloud computing and other technology trends. Net income is the lowest since 2007. A shakeup would hardly be surprising — with some analysts saying it’s long overdue.
IBM has swollen and shrunk over the years, as the following graphic shows. The company employed 406,000 people in 1985 and became so bloated and inefficient some feared it might collapse. Under CEO Lou Gerstner, the company executed a dramatic turnaround, with its workforce shrinking 55% by 1995. It has since fattened up again and now employs more people than it did in the 1980s:
As the charts show, IBM’s revenue and stock price have trailed off, but the size of its workforce has remained steady at around 430,000. When revenue dipped in the past, headcount reductions followed. Cutbacks may not reach the level Cringely is predicting, but some serious trimming may be necessary.
Rick Newman’s latest book is Liberty for All: A Manifesto for Reclaiming Financial and Political Freedom. Follow him on Twitter: @rickjnewman.
