Pink slips at Big Blue

IBM is cutting 5,000 jobs today, mostly in the US and mostly from its services division.

Big Blue's services division has been a steady source of profits for the firm. It seems that IBM will not be reducing capacity in its services business, but will shift the work to lower cost countries like India instead.

The cuts are likely to be controversial because IBM is still making cash despite the downturn - sales in the fourth quarter were down slightly at $27bn, but profits were up 12 per cent to $4.4bn. Global business services brought in $4.7bn. Further controversy may stem from the fact that IBM is currently in the midst of a $8bn takeover bid for Sun Microsystems.

Cuts are reportedly going to be more savage at higher management levels.

Official terminology for such cuts is "resource actions", but today has already been dubbed Black Thursday internally.

A spokesman for IBM said:

On March 26, we notified some employees to inform them that some jobs were being eliminated. This is a North American action. We are not communicating locations or the number of jobs as a result of this action. IBM continuously evaluates its mix of skills and resources throughout the year, and makes changes as needed. Managing resources in this way keeps us competitive, while adapting to the evolving needs of our clients. We anticipate that some employees will find other positions within IBM, and we’re helping them in that effort. Those employees who leave IBM will receive separation benefits.

The firm's union - Alliance@IBM - is reporting 1,674 cuts in Application Services.

IBM employs 386,558 around the world and about 115,000 in the US.

Ealier this month IBM imposed a ten per cent cut in contractor day rates. ®