IBM will furlough U.S. hardware employees to cut costs in late August and early September 2013. Employees will take a week off with one-third pay, Bloomberg reported. Ouch. The key takeaway: Cloud computing is squeezing IBM's hardware business, and the value of IBM's x86 server business could be falling -- even more -- each quarter.
First, the official news. Bloomberg reported:
"U.S. hardware employees, including those involved in development and procurement, will take a furlough week with one-third pay starting either Aug. 24 or 31, said Jay Cadmus, a spokesman for the Systems and Technology Group. Executives in the division will take no pay during the week.
The world’s biggest computer-services company is trimming expenses to preserve profit margins as hardware revenue continues to decline. Sales in the unit, which also includes storage devices and microelectronics, slid 12 percent in the second quarter from a year earlier to $3.76 billion."
Read between the lines and IBM is facing some hard times:
- IBM's x86 server business apparently remains up for sale. But a potential deal with Lenovo fell apart earlier this year.
- IBM has been promoting its PureFlex converged systems to MSPs. That move has some momentum, but not enough to offset IBM's overall hardware struggles.
- IBM in June 2013 had layoffs. Adding insult to injury, Big Blue called the move a talent "remix."
- The Top 100 Cloud Services Providers(businesses like Amazon Web Services and Google Apps) are hiring like crazy. Meanwhile, the SEC is investigating IBM's own cloud revenue claimsand IBM hardware is struggling.
As The VAR Guy's DH Kass noted a few weeks ago: IBM's top-line revenues have declined five consecutive quarters. And CEO Ginni Rometty shook up the hardware team's executive leadership in April 2013.
The new hardware furloughs ( on top of earlier staff cuts and changes) suggest IBM still hasn't found an answer to its hardware struggles.
The VAR Guy's advice to Big Blue? Sell the x86 server business for less money than originally expected. Cut your losses now, IBM. Because the downward server spiral only seems to be accelerating...