IBM denies layoffs result of deal with Hitachi

IBM says its recent deal with Hitachi had little bearing on the job cuts it made last week to its storage division. Maybe not, but one analyst said the collaboration will mean more paring down for both IBM and Hitachi.

Recent jobs cuts in its storage division raised more than a few eyebrows. But, while IBM insists the layoffs were determined long before the deal with Hitachi was finalized, at least one expert questions whether Big Blue's streamlining efforts says more about its storage strategy than Big Blue is letting on.

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Last month, IBM announced that it would team with Hitachi Ltd., to combine their respective hard disk drive operations into a new, standalone joint venture, the result of a budding storage relationship that can be traced back to July 2001, when IBM licensed the storage Application Programming Interfaces (APIs) for its Enterprise Storage Server, code-named Shark, to Hitachi Data Systems, a subsidiary of Hitachi Ltd. In return, IBM gained access to the APIs for Hitachi's Lightning 9900 Series storage server.

APIs are the programming code or instructions for how to access and share data between storage servers and devices.

"My feeling is that IBM and Hitachi are both looking to streamline their disk-drive and high-end storage businesses," said Mike Karp, senior analyst for Enterprise Management Associates, Boulder, Colo.

Karp predicted that IBM and Hitachi might take the relationship a step further and develop a generic, "vanilla-flavored" storage system, upon which each company could add its own software capabilities.

More evidence of IBM's cutting the fat from its operations came last week, when Big Blue announced a round of layoffs.

IBM handed pink slips to about 1,000 employees, 475 of which happened to be in the company's storage group in San Jose, Calif. The cuts also impacted workers at a number of locations including those in Rochester, Minn., and Endicott, N.Y.

IBM said, however, that the job cuts in its storage group were unrelated to its alliance with Hitachi.

"IBM did announce layoffs last week in several divisions, and yes, there was a small percentage of people in the storage systems group who were affected," said Glenn R. Hintze, manager of external communications for IBM's Storage Systems Group.

But, Hintze said, the IBM-Hitachi announcement had "no bearing whatsoever on these layoffs."

"This action was determined before the alliance was finalized in April," he said.

IBM called the layoffs a "skills rebalancing" to meet technical needs.

"Like any business, we constantly look at the products and services we offer to make sure we always have the right infrastructure and skills to support them at all times, so we stay competitive," said Hintze.

"IBM is absolutely committed to the storage business long term and this action will have no bearing on that commitment," he said.

More layoffs are expected and some analysts predict a total of 8,000 to 9,000 employees to be let go.

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