Tech giant IBM would lay off a small percentage of its employees reinforcing speculative reports that had been appearing in many media outlets.

According to sources,  job cuts will involve 0.5 percent of the total number of employees. Precisely, job cuts would affect 1,700 employees. The total workforce of IBM comes to 340,000 employees, said a statement.

The American tech giant, also known as Big Blue had cut jobs in 2016 and 2017.

Downsizing part of business realignment

According to reports, IBM is slashing headcount to streamline the business. The action plan involves a major acquisition and many new targets on growth and profits.

 “We are continuing to reposition our team to align with our focus on the high-value segments of the IT market and we also continue to hire aggressively in critical new areas that deliver value for our clients and IBM,” said a company spokesperson’s statement to CNBC.

IBM’s jobs page still shows 7,705 listed openings.

IBM’s first-quarter revenue released in April was not exciting. It showed a revenue dip of 5 percent year over year and was below analysts’ expectations.

The IBM stock had been up 16 percent since January of 2019.

IBM’s acquisition of open-source software giant Red Hat for $34 billion is in the works. The deal’s closure is expected in the second half of this year.

Why IBM is trailing in cloud business?

IBM’s lag in the cloud market has many reasons. In the contemporary cloud market, public cloud is leading the growth where IBM’s presence is nominal.

IBM’s strong point has been cloud computing via data-centers or private cloud thanks to its depth in mainframe computers. In the mainframe market, IBM still commands a whopping 90 percent market share.

Amazon groomed AWS services list as its major growth engine and is feeding the wing by its superbly growing consumer business.

By acquiring Red Hat, IBM is aiming to get into new areas of business and tap business from companies banking on public clouds, such as Amazon Web Services and Microsoft Azure.

Red Hat deal closure gaining pace

Meanwhile, IBM's senior vice president of global markets, Martin Schroeter stated that the Red Hat IBM deal is heading to closure.

Referring to the regulatory hurdle in the U.S, he said: “The U.S. went well.”  

Now Big Blue is grooming its global sales team on open source business.

On Red Hat’s oversight by IBM, Shroeter echoed what IBM CEO Ginni Rometty already said. The CEO had said Red Hat will remain a “Switzerland,” implying Red Hat’s status as a standalone entity will be retained and its autonomy respected.

“The developer ecosystem they built… we’re going to keep that exactly as it is,” Shroeter reiterated.