IBM Japan Ltd. to Downsize Work Force

IBM Japan Ltd. is scaling back its work force this year in an effort to improve profitability, the company said today.

IBM Japan, which in April announced its worst yearly earnings drop, has lost ground to aggressive Japanese competitors NEC, Fujitsu and Hitachi as purchases have slowed for its staple product, mainframe computers.

At the same time, the Japanese subsidiary of International Business Machines Corp. of Armonk, N.Y., remains bedeviled by its inability to introduce competitive smaller-size computers, analysts said.

“IBM Japan is weak in personal computers. Downsizing is a trend in the industry, and IBM is late in this area,” said Kunihiko Kawada, an industry analyst for James Capel.

After suffering a 21% plunge in 1990 pretax profits to $1.1 billion, IBM Japan plans to temporarily transfer 400 employees to its affiliates and cut its recruitment of college graduates in half, to about 500. It also said it was lowering the age for early retirement eligibility from 55 to 50.

“We are trying to reorganize ourselves to deal with last year’s unfortunate business results,” IBM Japan spokeswoman June Namioka said.

But she denied that the moves represented employee cutbacks. IBM Japan, like most large Japanese companies, maintains a guaranteed-employment policy.

For decades, IBM’s Japanese subsidiary, with 25,000 employees and revenues of $9.6 billion in 1990, has been held up as a textbook example of how a U.S. corporation can succeed in Japan’s tough high-tech market. IBM Japan was founded in 1950.

But the company fell to third place in Japan’s total computer market in 1990 from second place in 1989, according to Dataquest Japan, a data research company. Fujitsu is Japan’s market leader and NEC is now second, ahead of IBM.