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Business

IBM Job Cuts Concentrated in Europe

IBM's announcement this week that it would cut up to 13,000 jobs as part of a major restructuring has particularly gloomy consequences for the EU as most of the cost-saving measures target the firm's European operations.

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IBM wants global teams instead of single-company operations

The computer giant, which announced the plan earlier this week to cut 10,000 to 13,000 jobs, said the majority would occur in Britain, Germany, France and Italy.

The restructuring is intended to reduce bureaucracy and scale back operations in slower growth countries. IBM chief financial officer Mark Loughridge said the moves would create smaller, more-flexible local units to improve direct contacts with clients, and shift resources to higher-growth markets. One specific move would be to eliminate an unnecessary layer of pan-European management.

Most of the reductions would involve voluntary buyouts, though some workers in Europe and the US would be laid off, Loughridge said.

Europe accounts for about one-third of IBM's global work force of around 300,000.

Disappointing earnings

The company nicknamed "Big Blue", having shocked Wall Street with disappointing earnings figures last month, signalled that the job cuts were part of efforts to reinvent itself after it ditched its personal computer unit.

The restructuring will incur a pre-tax charge of up to $1.7 billion (1.3 billion euros) in the second quarter of the fiscal year, before the plan starts to pay off financially in the second half of 2005, IBM said.

Markets expected some kind of restructuring from IBM after the first-quarter earnings figures jolted the company to hasten a review of its strategic direction.

Lenovo Computer in Peking

A Chinese salesman promotes Lenovo computers at a shop in Beijing, China, Friday, Jan 28, 2005. China's computer giant, Lenovo, made a deal to buy the personal computer division of IBM for a proposed US$1.75 billion

On Sunday, IBM wrapped up a 1.75-billion-dollar deal to sell its PC division to Chinese computer maker Lenovo, in a startling sign of both IBM's transformation and of China's emergence onto the global stage.

European toll

German labor leaders said as many as 2,500 jobs in that country may be affected by the move, or about 10 percent of the German IBM workforce.

On Thursday, Amicus, one of Britain's largest unions, warned the plan could hit British workers the heaviest.

"We fear the worst, given that it is quicker, cheaper and easier to get rid of workers in the UK than elsewhere in Europe," Amicus' National officer Peter Skyte said.

In France, union leaders said they expected more than 1,000 jobs affected out of a total of 11,000 in the country. Several union leaders said they were planning on a protest calling for no layoffs in France, with cuts made only on the basis of voluntary buyouts.

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