IBM blames job cuts on 'weak Europe'

IBM has blamed economic problems in Europe, notably weak demand for IT services in the region, for its decision to cut up to 13,000 jobs in a restructuring of its European operations.

In a conference call on Thursday, Mark Loughridge, IBM's senior vice-president and chief financial officer, said the company was looking to strengthen its position selling high-value products and services.

Loughridge denied that IBM was reacting to recent poor financial results, claiming that the IT giant was "reallocating resources to address market demand on one hand, and consolidating and reducing resources to drive efficiency on the other."

"It is no secret that there has been an extended period of soft economic conditions in many European countries," said Loughridge.

"Our business results, and those of many other companies have reflected those economic conditions. In this environment, actions to address structure, efficiency and matching our skills with the demand we see in local markets are required to stay competitive," Loughridge added.

IBM plans to lose its top layer of European management and hand control of pricing decisions, marketing programmes and sales promotions to staff who work "in the field" with clients. Existing top management will be mostly "realigned", IBM said, by either moving to a role working directly with clients, or at one of several new 'centres of excellence' which will support sales teams.

Analysts are already speculating that this move away from a pan-European management layer could be adopted by other IT companies. Ian Wesley, research director at analyst group Ovum, pointed out that IBM had once effectively invented the idea of a management powerhouse for Europe, the Middle East and Africa.

"An interesting question is whether IBM, having pioneered the idea of EMEA-level coordinating structures, is pointing the way to the future here. We suspect that where IBM leads, others will follow," said Wesley.

Loughridge revealed that jobs will be lost in the UK, as well as France, Germany, Italy and the US. While European employees will be offered voluntary redundancy, all US job losses will be involuntary.

Unions are concerned that jobs could be lost most quickly in the UK, due to the difference in labour laws.

Graeme Wearden writes for ZDNet UK