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IBM Korea Downsizes Hardware Workforce Following Software
Struggle for Survival
IBM Korea Downsizes Hardware Workforce Following Software
  • By matthew
  • October 28, 2014, 06:24
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IBM, which made a strenuous effort to improve its performance by selling its x86 server business, is not exhibiting good performance in the software area, either. Even though it is undertaking intensive corporate restructuring in Korea, experts are saying that it will not be easy for the company to escape from lackluster sales.

According to industry sources on Oct. 27, IBM Korea is unable to improve performance in the software area, owing to its struggling hardware business. To address the problem, the company reportedly merged the hardware division with the software unit and scaled back its workforce.

IBM is trying to change its course to become an IT service company using software, as shown by the completed sale of its x86 server business to Lenovo on Oct. 1. Despite its efforts, IBM's software business is showing mediocre performance. The company was outperformed by Oracle, and thus lost its runner-up software business position in the third quarter of last year. On top of that, quarterly sales growths have been stagnant at around 1 percent.

IBM Korea, on the other hand, posted 229 billion won (US$218 million) in software sales last year, a 3 percent year-on-year gain. Compared to the hardware business with around 10 percent decreased sales, the number seems to be encouraging. However, the software unit does not play a role as a cash cow, since sales have been growing merely at 1 to 3 percent for several years.

In particular, sales from new software licenses in the first half of this year were roughly half the figure for the same period last year, and the company implemented intensive corporate restructuring. As a result, 60 people, accounting for 20 percent of the software business, were said to be moved to call centers or the IT service area.

A source in the IT industry explained, “As IBM Korea's sales from new licenses cut in half in the first half of this year, the software business was merged with other units.” The source added, “To the best of my knowledge, those who were responsible for software sales suddenly started to work at a call center. So, they feel extremely ashamed.”