IBM Pledges New York Job Retention a Year After Firings

Feb 25, 2014 5:06 pm ET

(Updates employee numbers in 13th paragraph.)

Feb. 25 (Bloomberg) -- International Business Machines Corp. promised to keep 3,100 jobs in its home state through the next two years -- restoring positions the company eliminated last year.

IBM agreed to keep the high-technology jobs in the Hudson Valley through 2016, increasing the number of positions it has pledged to retain by 750, New York Governor Andrew Cuomo said yesterday in a statement. As part of a global workforce reduction, IBM fired almost 700 workers last year in Dutchess County, where it had about 8,000 employees as of 2012, according to the county government.

Job cuts have been one of IBM’s tools to maintain profit growth as it struggled during the technology industry’s transition to the cloud, where data and software are delivered online instead of being stored locally. Amid seven quarters of falling revenue, Chief Executive Officer Ginni Rometty has turned to stock buybacks, tax cuts, asset sales, and worker firings and furloughs to stay on track with profit goals.

“Their shareholders want to make more money,” Marc Molinaro, Dutchess County executive, said in an interview. “There is only so much the government, the community, or even employees can expect from a private business.”

Yesterday’s agreement included 750 positions in the “semiconductor plants and related fields” in Dutchess County, Albany and Yorktown Heights, Cuomo said. IBM is also adding 500 jobs in Buffalo for a nanotechnology center.

More Firings?

Molinaro said Dutchess County saw 697 jobs eliminated last year with little advance notice when IBM, the county’s biggest employer, embarked on its $1 billion restructuring. The job losses included 328 workers at IBM’s Poughkeepsie location and 369 positions in East Fishkill.

The Armonk, New York-based company is spending another $1 billion in the first quarter to begin firings again, and the agreement with the state may help protect some of its workers from being dismissed this time. Still, Molinaro said he’s looking to shift the county’s employment dependence away from IBM while keeping the existing jobs.

“We want to sustain the old and very quickly and very aggressively get to the new,” he said.

Cuomo said the agreement helps keep technology jobs in the state.

“I applaud their decision to preserve thousands of Hudson Valley jobs and expand the company’s high-tech footprint here in New York,” Cuomo said in the statement.

Richard Azzopardi, a spokesman for Cuomo, declined to comment beyond the governor’s remarks. Doug Shelton, a spokesman for IBM, deferred to Cuomo’s office for comment.

Dismissals Begin

Worldwide, this year’s job cuts could lead to the elimination of at least 13,000 employees, Toni Sacconaghi, an analyst at Sanford C. Bernstein & Co., said in a Feb. 3 report.

The company has already begun laying off employees in Europe, Asia and South America, according to Alliance@IBM, an employee group. Workers in the U.S. and Canada are expected to be notified about job cuts tomorrow, the group said. The company’s total workforce was 431,212 at the end of 2013, the first time in a decade that the employee count dropped.

Shares of IBM were little changed at $183.23 at the close in New York.

As part of the shift in its focus to products like cloud services and data analytics, the company agreed in January to sell its low-end server division for $2.3 billion to Lenovo. IBM said it expects to send more than 7,000 workers to the Chinese computer maker in the transaction.

Chipmaking Partner

IBM is also looking for a joint-venture partner for its chip-manufacturing business after failing to attract a buyer for the division, two people with knowledge of the matter said this month. IBM has a chipmaking plant at the East Fishkill location in Dutchess County. The company hired Goldman Sachs Group Inc. to explore possibilities for the business, another person said.

Dutchess County would welcome a new company to take over chip manufacturing or other hardware plants in the area, said Ron Hicks, deputy commissioner for strategic planning and economic development.

“We’ve got to make sure that what they have here -- their chip manufacturing and their mainframes -- that it stays here,” he said.

--With assistance from Freeman Klopott in Albany. Editors: Crayton Harrison, John Lear