A long-awaited deal between IBM and Lenovo, in which Lenovo acquires a chunk of IBM’s server business, was announced on Thursday.
Lenovo agreed to pay $US2.3 billion. That’s lower than the rumoured price range IBM was hoping to get. Sources had previously leaked that IBM was angling for $US2.5 billion to $US6 billion.
But one interesting tidbit tucked into the announcement was that with this deal, IBM will transfer thousands of employees to Lenovo. The press release says:
Approximately 7,500 IBM employees around the world, including those based at major locations such as Raleigh, Shanghai, Shenzhen and Taipei, are expected to be offered employment by Lenovo.
Employees had previously told Business Insider that this unit was the target of some of IBM’s layoffs last summer. IBM took a $1 billion charge in 2013 for what it calls “workforce rebalancing,” and some experts said that this amounted to between 6,000 and 8,000 jobs cut worldwide.
Even with these 7,500 jobs gone, IBM may not be done trimming the headcount. During a conference call with analysts after IBM reported its 2013 earnings, (a couple of days before announcing the Lenovo sale), the company said it was in the process of another $US1 billion “workforce rebalancing.” Those cuts are going on now.
CFO Martin Schroeter explained:
As we noted the call, because we are going to be taking our workforce rebalancing charges earlier than we did last year, it will be in the first quarter, so on a on a full-year basis, there won’t be any year-to-year impact. We do expect that will be about $US1 billion again same as last year, plus or minus $US100 million.
The latest total headcount numbers for IBM are from 2012: 434,246.
IBM is trying to shift itself out of shrinking markets while investing more heavily in growth markets. That includes $1 billion investment in the new IBM Watson Group, where IBM will try to turn its supersmart, human language computer, Watson, into a profitable business. It also includes a $US1.2 billion investment to expand its global cloud-computing services worldwide.
IBM certainly needs to find that growth. Revenues declined in most of its major business units throughout 2013. That led CEO Ginni Rometty to announce that senior staff would not take their 2013 bonuses.
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