5 June 2002 IBM is to take a pre-tax charge of $2.5 billion (€2.7bn) and lay off 1,500 workers as part of a re-organisation plan. The company will also focus the group on services for chip and device makers that it hopes will give it a large new revenue source.

IBM believes the slump in the semiconductor market has changed the market for chips, with many companies deciding to outsource their chip manufacturing to other companies. “These companies are looking for foundries with advanced technologies and the expertise on how to design both individually and on boards,” claims company spokesman Michael Loughran.

IBM will set up a “design services” division within the technology group to design and manufacture other companies’ chips using technology such as silicon-on-insulator that it previously reserved for its own products; it says its research indicates the division could be worth $5.75 billion (€6.14bn) in revenues within a few years.

As part of the company’s cost reduction drive, it has spun off its loss-making hard disc drive business into a joint venture with Japanese vendor Hitachi. Employees laid off from the technology division have 30 days to find jobs elsewhere in the division or the company.