Markham, TO lab likely targets of IBM layoffs says analyst

IBM’s Markham, Ontario headquarters and it software laboratory in Toronto are the likely prime targets of world-wide workforce reductions now underway at Big Blue, according to a Canadian technology industry analyst.

Reports of a massive layoffs with numbers ranging anywhere from 4,200 to 16,000 were rife yesterday as many members of Alliance@IBM, the unofficial workers organization of the company, continued blogging about accounts and rumours of employees being let go from offices all over North America and Europe.

“The biggest targets will be the Markham headquarters, IBM’s Toronto Software Lab and other R&D facilities because the company is looking to cut production and operation costs,” said Andy Woyzbun, lead analyst at research firm Info-Tech Research Group, in London, Ont.

IBM which has more than 386,000 employees worldwide is the largest employer in Markham. Its headquarters and development facilities in the growing tech centre north of Toronto employs some 8,700 workers.

The Round Rock, Texas company’s manufacturing and development operations include a semiconductor packaging plant in Bromont, Quebec, and three Centres for e-business Innovation located in Burnaby, B.C., Edmonton, Alta., and in Toronto. An estimated 18,720 people work for IBM in Canada.

That the layoff reports at IBM come after the company announced strong fourth quarter earnings for 2008, also cast some doubts that the economic downturn is the reason behind the jobcuts, said Woyzbun.

“In situations such as these, it’s very possible that the recession is being used as an excuse to rationalize the company operations and production,” he said.

Despite IBM’s strong numbers in 2008, companies do not make decisions based on past performance but rather on current situation and market projections, the analyst explained. “If a company thinks its customers will not be buying much in the future, that company will cut back in production even when earnings are good at the moment.”

“An economic downturn provides the perfect reason to cut back on production cost,” Woyzbun said. Other U.S. IT companies, some with Canadian operations, have announced layoffs in the previous weeks. Among them were: Microsoft and Intel , Texas Instruments and Spint Nextel.

German software company SAP AG, also announced today that it was planning to cut some 3,000 positions from its current 51,000 workforce despite a 13 per cent jump in revenues.

SAP Canada Inc. said the retrenchments will include Canadian operations.

“While we are not able to provide further detail on the impact of today’s announcements on employees in Canada, we will take full advantage of attrition as a factor and are engaging in open dialogue with our management and employees to find equitable solutions,” statement from the company said.

IBM today, refused to acknowledge reports of specific layoff incidents reported by Alliance@IBM and stuck with previous statements that IBM will not at the moment release job cut numbers.

“IBM does not have a union. The Alliance@IBM does not officially represent our workers so we cannot go by their reports,” said Mike Boden, IBM Canada spokesman. “We have notified our employees last week about the layoffs, but we are not releasing any numbers and we are not targeting any specific functions or locations,” he said.

The Alliance@IBM Website has been so busy with traffic that its server was knocked offline this afternoon from the load, according to Lee Conrad, a former IBM employee who now is national coordinator of Alliance@IBM.

Conrad said that about 1,200 employees who work in IBM’s Systems Technology Group at sites around the county have been laid off, and about 200 in the research division were let go as well. These reports bring the total layoff count at IBM to about 4,200.

Last week, the group said that about 2,800 employees were laid off in two IBM units: its software group, and sales and distribution operations.

Conrad said IBM’s level of secrecy was mystifying.

“IBM should be as forthcoming as all the other companies,” said Conrad. “We just simply don’t understand why they are keeping it a secret and neither do the employees.”

More employees were notified today of cuts, according to Doug Shelton, an IBM spokesman.

“This is an ongoing process that we do throughout the year to match skills and resources with our client needs,” said Shelton. “We don’t think its necessary every time we do that to make an announcement about it.”

The layoffs are occurring in a number of locations, say Conrad and local news reports. Fox News 44 of Burlington, Vt. reported layoffs in Essex Junction.

In East Fishkill, New York,The Times Herald Record reported that layoffs there may be close to 700. In Rochester, Minn. there was a report of layoffs, as well as reports of layoffs at the company’s operations at Research Triangle Park in North Carolina.

Conrad said Alliance@IBM has heard reports that as many as 16,000 employees may lose their jobs. He said some of the employees who are getting cut are have been training workers from IBM facilities in Brazil, India and other places to take over their jobs.

Others have been cut on the basis of performance reviews, and some because of a general job action. The Alliance@IBM is a Communications Workers of America local that doesn’t have enough members to gain official recognition as a bargaining unit.

It’s hard to know how many of the job cuts occurring at IBM or any of other firms that have announced cutbacks, are due to the economy or part of the gradual shift of some types of works to overseas locations.

Washington Alliance of Technology Workers, or WashTech, a labor group in Seattle, said Monday that Microsoft’s India operations were not being reduced in size as part of its plan to cut 5,000 jobs, something Microsoft confirms.

But the vendors have also been hit by the general economic downturn as business customers delay equipment purchases and other upgrades.

Bernard Courtois, head of the Information Technology Association (ITAC), one of Canada’s largest tech industry organizations, is confident the country’s IT companies can weather the worsening recession.

“The tech industry will do better than other sectors in the country because our products and services remain largely in demand,” he said. Courtois noted that layoff announcements from technology firms remain small in comparison to those made by other businesses.

“Even IBM’s reported 4,500 job cut is small compared to the 20,000 at Caterpillar.”

(With files from Computerworld US)

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