International Business Machines Corp
) has cut its workforce by 1,300 in the U.S. as a part of its
workforce rebalancing initiative, reported Bloomberg. The company
is expected to spend approximately $1 billion this year for the
current initiative and the majority of the spending will be in
the current quarter.
Alliance@IBM, affiliated with Communications Workers of
America union, reported that among the positions that are being
eliminated, 222 persons were from the marketing wing and 165 from
the research and development (R&D) wing.
IBM, in its first-quarter earnings release confirmed that most
of the job cuts would be outside the U.S. Thus far, the company
has initiated 700 job cuts in Germany, 128 in Denmark and 250 in
Italy, reported Bloomberg.
Through these restructuring initiatives, IBM expects to
achieve its fiscal year operating earnings per share target of
$16.70. Moreover, IBM's current $1 billion restructuring plan is
a significant increase from the $803 million that it had spent in
The company expects the current initiative to help results as
IBM reported a dismal first quarter in April. Revenues declined
5.1% from the year-ago quarter and 20.1% on a sequential basis.
Unfavorable foreign currency movement, particularly in the yen,
had a negative impact of 2.0% on first-quarter revenues. Though
earnings increased 7.9% from the year-ago quarter, they plunged
44.3% primarily due to lower revenues.
Although IBM reported a dismal first quarter, we believe that
the strong backlog, improving outsourcing signings and new
contract wins will boost the top line, going forward. However,
sluggish IT spending and continuing weaknesses in the domestic
market and Euro zone are the major concerns in the near term.
Additionally, deteriorating results in the hardware segment
remain a major concern, going forward. IBM continues to expand
its Power systems into the Linux market. IBM is also focusing on
further developing its flash technology and storage business. We
believe that these improvements will boost hardware revenue,
Product strategies will also help it to counter the strong
), going forward.
Currently, IBM has a Zacks Rank #3 (Hold).
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