IBM to Pare 10,000 Jobs, Take a Massive 4th-Quarter Charge : Computers: Company, stung by competition and product delays, plans

International Business Machines Corp., hurt by product delays and rising competition, said today it will eliminate 10,000 jobs without layoffs by the end of 1990 and take a huge, $2.3-billion charge in the fourth quarter for cost-cutting and other measures to raise profits.

The giant computer company also said at an analysts’ meeting in New York that its board had authorized spending up to $4 billion to buy back its shares.

“The actions we are describing today underscore our ongoing resolve to make IBM the most competitive information processing business in an industry that continues to grow,” said IBM Chairman John Akers.

Shares of IBM rose in active trading today following the announcement. IBM was up $1.25 at $100.50 on heavy volume.

Akers told analysts that the staff reductions would cut IBM’s domestic work force by at least 10,000 people to 206,000 by the end of 1990, a reduction of more than 37,000 employees from 1985 levels.

The cuts would be achieved through restricted hiring and increased attrition at nearly every IBM location in the United States, said chief financial officer Frank Metz.

Severance pay of one week’s pay for every six months of service, up to a maximum of 52 weeks’ pay, will be offered to those who choose to leave, Metz said.

The severance pay allocations would total about $500 million, which is part of the fourth-quarter charge.

The company also said that “consolidations and capacity reductions at some U.S. locations” are being implemented to increase efficiency. It did not elaborate.

IBM had been expected to take actions to reduce its costs after product delays and rising competition hurt 1989 profits. Its third-quarter per-share earnings fell sharply to $1.51 from $2.10 a year earlier, due partly to a delay in introducing a disk storage device.

Wall Street had speculated for several weeks that IBM was considering some sort of program to pare its worldwide work force of 387,000. The company has a longstanding policy of no forced layoffs, which IBM officials said was still in force.

Industry analysts had said Armonk, N.Y.-based IBM would either need to boost revenues significantly above current levels of slightly over $60 billion or cut costs substantially to raise profits.

Akers said the fourth-quarter pretax charge of $2.3 billion will cut IBM’s after-tax profits by $2.25 a share, and would reduce costs and expenses starting next year by about $1 billion. The cost savings, he said, would add about $1 to its per-share profits in 1991.

Chief financial officer Metz said the $2.3-billion pretax charge includes actions to recover software and technology investments of about $500 million, $1.3 billion for plant consolidations and reduced operations and adjustments in the value of special investments.

The new stock repurchase program will bring the company’s total stock purchases since 1986 to $10.5 billion or about 15% of shares outstanding at that time.