IBM plans staff cuts in response to seventh consecutive dip in revenue

22 Jan 2014

IBM headquarters

Technology and consulting firm IBM announced its fourth-quarter and full-year financial results for 2013 on Tuesday, and also revealed the company’s plans to sacrifice bonuses for senior staff and rebalance its workforce in 2014.

IBM reported revenue of US$27.7bn in Q4 2013, noting a decrease of 5pc (or 3pc when adjusted for currency). This marks the company’s seventh quarterly decline in a row and is largely attributed to its struggling hardware division.

Revenue for IBM’s hardware segment dropped a significant 27pc in Q4 2013, dragging down better-performing businesses such as software and cloud services.

Full-year results

For the full-year 2013, IBM’s revenue reached US$99.8bn, a decline of 5pc on 2012’s US$104.5bn. In pre-tax income, its systems and technology division marked a loss of US$500m – a steep drop of US$1.7bn year-on-year – whereas software, services and global financing divisions all saw growth.

IBM’s diluted earnings for the full-year amount to US$16.28 per share (non-GAAP) – an increase of 7pc. Looking ahead to the close of 2014, the company foresees an increase of over 10pc, reaching at least US$18 per share.

Job cuts to follow

However, despite its optimistic outlook, IBM chair, president and CEO Ginni Rometty revealed measures to be taken to counter declining revenues. “While we made solid progress in businesses that are powering our future, in view of the company’s overall full-year results, my senior team and I have recommended that we forgo our personal annual incentive payments for 2013,” she said.

IBM will also take a US$1bn restructuring charge in the first quarter of 2014 and chief financial officer Martin Schroeter revealed that job cuts are on the way, The Wall Street Journal reports. “A spokesman for the Alliance@IBM/CWA Local 1701, a union-affiliated group, said it received emails from IBM employees who were asked to submit names for company layoffs by this Friday,” the report claims.

Earlier this week, it was revealed that IBM also plans to sell off its low-end server business to generate additional revenue.

In after-hours trading on Tuesday, IBM’s shares dropped about 3pc to US$182.27.

Elaine Burke is the host of For Tech’s Sake, a co-production from Silicon Republic and The HeadStuff Podcast Network. She was previously the editor of Silicon Republic.