IBM Cuts 600 Jobs in Chip Division
IBM Corp., the world’s largest computer maker, said Monday that it would fire 600 workers and place 3,000 on unpaid leave for a week to stem losses at its chip-making business.
About 500 of the firings will take place at a factory near Burlington, Vt., said Scott Sykes, a spokesman for Armonk, N.Y.-based IBM. The cut in the workforce comes after the company fired 1,500 workers last year.
After more than $1 billion in losses last year, IBM’s chip-making business had a second-quarter loss of $111 million, about $100 million more than analysts had expected.
IBM has had production problems at a year-old $2.5-billion plant in East Fishkill, N.Y.
“IBM doesn’t quite have all of its manufacturing processes worked out,” said Pierr Johnson, an analyst with John Hancock Funds. “They don’t have production yields where they need to be.”
Production problems are typical for new semiconductor plants, Johnson said. They are more noticeable at IBM because the company has fewer chip plants than rivals, he said.
Shares of IBM, also the top seller of computer services and the world’s No. 2 software company, rose $1.73 to $83.52 on the New York Stock Exchange.
Chief Financial Officer John Joyce has said the chip business isn’t growing as quickly as IBM expected.
IBM has said it doesn’t expect chip sales to recover until the fourth quarter.
“This year is shot,” said Carl Hoagland, an analyst at Boston-based State Street Corp. State Street is IBM’s top investor, with 132 million shares.
“There isn’t going to be any kind of improvement. They could use a few more customers,” he said.
About 100 people at other semiconductor facilities in cities including Austin, Texas; Raleigh, N.C.; Rochester, Minn.; and East Fishkill will lose their jobs, IBM’s Sykes said. He declined to forecast cost savings.
The unpaid leaves will be staggered. None of the affected workers was directly involved in production, he said.
John Kelly, the IBM executive in charge of chip making, also is taking a furlough, Sykes said.
IBM makes chips for other companies who don’t want to spend billions of dollars building their own chip plants, along with making semiconductors for IBM’s own server, personal and laptop computers.
The unit has 18,000 workers and was one of two IBM units to have a second-quarter loss. The other was IBM’s Personal Systems Group, which makes IBM personal and laptop computers and had losses of $8 million.
