IBM pauses counting its billions to trim Red Hat staff

Customers shouldn't even notice, sniffs Linux distro CEO

On Monday, Matt Hicks, CEO of IBM-owned Red Hat, said the Linux distro maker plans to lay off just under four percent of its roughly 20,000 person workforce, which amounts to less than 800 people.

In a published note, Hicks said the staff reductions will occur over the next few months.

"Our reductions will focus on general and administrative (G&A) and similar roles across all functions and represent a reduction of just under four percent in total," he said. "We will not reduce roles directly selling to customers or building our products."

We will not reduce roles directly selling to customers or building our products

Hicks said the decision was necessary to compete in today's environment, and cited the need to align company resources with headcount and strategy.

IBM last week reported [PDF] first quarter revenue of $14.3 billion, matching Q1 of last year, with non-GAAP earnings per share of $1.36, which excludes some costs, down three percent. Gross profit was reported up three percent to $7.5 billion.

Big Blue's software revenue reached $5.9 billion for the quarter, an increase of 2.6 percent. Growth at Red Hat was higher, at eight percent, though that's the smallest increase since IBM acquired Red Hat in 2019.

IBM in Q1 took a $260 million charge associated with "workforce rebalancing" and said that henceforth the company will "no longer [include] workforce rebalancing charges in our measure of segment profit to provide a view of our segment results consistent with our ongoing operational profile."

That leaves about $40 million of layoff-related charges, per company estimates, for Q2, though the charge won't be called out in the accompanying financial disclosure.

IBM in January said it planned to cut 3,900 jobs in the months ahead, though CEO Arvind Krishna subsequently said job cuts "may be closer to 5,000 once finished" in an interview last week.

Asked for comment, a Red Hat spokesperson said Hicks's statement was all that the Linux outfit would say on the matter and declined to say whether almost 800 layoffs were included in IBM's total.

An IBM spokesperson however told The Register, "This is part of the action first outlined in January during IBM’s 4Q22 earnings call."

A Big Blue employee who was laid off recently after many months of being sidelined without responsibilities – an unsuccessful severance-saving gambit to encourage resignation that cost the company an estimated $250,000 in wasted wages – expressed skepticism about the numbers cited by Krishna, suggesting that IBM's job cuts have been deeper than acknowledged.

"On Arvind’s last 'Ask Me Anything' call, he was asked about the layoffs in several questions on Slack," our source said, referring to an April 13 call with employees.

"He addressed the questions by saying that he had already talked about it (referring to the earlier 3,900 in January). People were not happy with that answer. But it’s not a two way call. There is no feedback to him about the call. He does not want to be in the press with all the other companies [conducting layoffs]. But IBM should be there front and center, in my opinion."

He does not want to be in the press with all the other companies [conducting layoffs]. But IBM should be there front and center

The messages from IBM's internal Slack workspace seen by The Register express surprise about the lack of communication accompanying the IT giant's "resource action," which occurred the week prior to the call, and urge Krishna to explain the rationale for effectively disallowing remote work – the consequence of laying off US recruiting staff who live more than what's deemed a commutable distance from the company's office in the Raleigh-Durham area of North Carolina.

"Why is remote work no longer feasible?" asked one employee.

"The answer about layoffs was too general and frankly, disingenuous," said another.

"When the charge back on earnings was disclosed it was generally perceived to be in relation to the [Kyndryl-related] job contractions within IBM. I am not convinced that the wide ranging layoffs fell into the way it was communicated. Many people totally unrelated to [Kyndryl] were laid off. There were other issues that were not fully explained to anyone outside of management."

Our source didn't a way to verify the actual number of people let go, and said discussions among employees have speculated that the real figure may be twice or three times what's been officially acknowledged.

IBM also claims to have hired 7,000 people in Q1.

'Indiscriminately'

"People seem to have been hit everywhere," our source said. "The very worst example is apparently cutting all the HR talent recruiters who lived beyond a certain distance from Raleigh. That way they couldn’t be blamed for discrimination, but wow, what a way to lose talent indiscriminately."

IBM, particularly over the past five years, has been accused of trying to get rid of older workers. One method for doing so, it's alleged, has been to disallow remote work, knowing that redeployment orders to relocate to a hub office have a low acceptance rate. More generally, the company has also faced (and settled) multiple lawsuits by former employees who claim they were laid off because of their age and that younger workers were brought in to fill their roles.

In 2014, IBM stopped reporting the age of people laid off, ostensibly as a privacy protection. In 2020, the US Equal Employment Opportunity Commission (EEOC) concluded [PDF] that there was reasonable cause to believe that IBM discriminated on the basis age by disproportionately targeting older workers for job cuts.

Despite the EEOC opinion and numerous legal challenges, IBM's Chief Human Resources Officer Nickle LaMoreaux last year insisted "there was (and is) no systemic age discrimination at our company." ®