Motorola and IBM have both announced 4,000 and 1,500 job losses respectively in bids to increase profitability and streamline their businesses.
In an extension of a cost-cutting programme it began in January, Motorola said it would lay off 4,000 more workers.
The move will help the company to save $600 million (£304m) annually starting in 2008, including additional money-saving measures like prioritising its investments, continuing discretionary spending controls, cutting general and administrative expenses and site rationalisation.
Although it trails only Nokia in sales of wireless handsets, Motorola has struggled to translate its sales into profits. The company began this restructuring programme after watching its profit drop sharply, from $1.2 billion in the fourth quarter of 2005 to $624 million for the fourth quarter of 2006. The results were even worse for the first quarter of 2007, as Motorola posted a loss of $366 million compared to its profit of $849 million for the same period a year ago.
In a search for change, the company replaced its chief financial officer in March. At that time, chief executive Ed Zander blamed the problems on dropping prices for low-end mobile phones and Motorola's decision to give up market share instead of entering a price war with competing vendors.
Motorola also said it would finish making the 3,500 job cuts it had previously announced by 30 June, contributing to an estimated $400 million in annual savings. The restructuring will also incur its own costs. Motorola will subtract a one-time charge of $300 million from its savings to pay for severance packages and other costs of the workforce reductions.
"Today's actions are an update to the commitment we made during our first-quarter earnings conference call – to drive out additional costs – and a continuation of the plan we announced in January," Motorola's chief financial officer Tom Meredith said.
Meredith promised the cuts would not distract Motorola from keeping its focus on long-term plans in customer service and support, product quality and research and development.
Meanwhile, IBM laid off 1,573 employees, as part of a continuing overhaul of its services unit.
Most of the layoffs came from IBM's services unit and most from North America, said Edward Barbini, a company spokesman. The layoffs were part of a restructuring effort the company announced during its first quarter financial results in April.
At that time IBM chief financial officer, Mark Loughridge said the company needed to address the cost of its services unit in North America. Based on past layoffs, about 20% of those laid off this week will find other jobs at IBM, Barbini said. At the end of 2006, IBM had about 355,000 employees.
According to union leaders, IBM laid off more than 1,300 people from its global services division earlier this month.
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