IBM Cuts 400 Engineering Jobs At U.S. Development Centers

IBM is quietly laying off about 400 U.S.-based engineers who have been working on the development of components for one of the technology giant's most important hardware products, according to sources familiar with the company's plans.

The cuts are taking place at IBM engineering facilities around the country, including sites located in Austin, Texas; Burlington, Vt.; San Jose, Calif.; Raleigh, N.C.; and Rochester, Minn. The cuts have also touched IBM locations in Poughkeepsie and Fishkill, N.Y.

The affected engineers are developing components for IBM's line of BladeCenter servers--one of the company's best-selling hardware products. Sales of BladeCenter systems, which feature a slimmed-down profile for ease of management and expandability, enjoyed a 35% year-over-year increase in IBM's second quarter. During the same period, IBM's hardware sales overall increased only 3%, according to the company's second-quarter financial report.

A memo issued to IBM managers to help them explain the cuts to affected workers says those engineers that received layoff notices were given 30 days to find a new position within IBM or face termination. The memo, obtained by InformationWeek, is dated Oct. 5--the day on which employees were notified of the job cuts.

According to the memo, IBM believes the layoffs are necessary in order for the company "to continue to lead in what is a very dynamic marketplace."

The memo further states, "Some of those changes include streamlining our development organization to rebalance skills, eliminate redundancies and deliver greater economic efficiencies."

Workers whose jobs are cut will receive one week's pay for every six months of service, the memo states.

The memo doesn't specify whether the work performed at the affected facilities will be moved elsewhere. However, IBM has publicly stated its intention to invest $6 billion over the next three years developing its high-tech workforce in India. Engineers and programmers in India are paid less than half of what their U.S. counterparts earn. IBM officials weren't immediately available for comment.