Hoping to raise its profit by cutting expenses, IBM on Wednesday said it will eliminate up to 13,000 jobs, mostly in Europe, and take a restructuring charge of up to $1.7 billion.

The reorganization calls for the company to revamp its operations and organizational structure in Europe by “reducing bureaucracy and infrastructure in lower-growth countries??? with a focus on local operations.

“This eliminates the need for a traditional pan-European management layer to coordinate activity,??? the company said in a statement. “As a result, IBM will create a number of smaller, more flexible local operating units in Europe to increase direct client contact.???

The restructuring will eliminate between 10,000 and 13,000 workers. Worldwide, it will consolidate services delivery offices. Big Blue employed 329,000 people at the end of last year. As a result, IBM will record a pre-tax charge of between $1.3 billion and $1.7 billion for the quarter that ends in June.

IBM’s announcement came a day after it finalized the sale of its personal computer division to Lenovo. “The Lenovo sale and the restructuring are both aimed at the same strategy,??? said IBM spokesman John Bukovinksy.

He said IBM will focus on two parts of the services industry: emerging markets, like Brazil, China and Russia, where IBM’s service business grew 18 percent last quarter; and “business transformation,??? in which IBM will take over core services for businesses.

In April, IBM announced disappointing earnings of $0.85 per share in contrast to the $0.90 that Wall Street analysts had expected, and the company had been expected to take steps to increase profit through a restructuring.

“I’m sure they’ve been planning this long before [the quarterly earnings announcement] happened,??? said analyst Rod Bare of Morningstar. “I think the quarterly results highlighted the need for this to happen, for them to re-allocate resources from low-return areas to high-return areas.???

Stock Slide
IBM shares closed up $0.68 to $77.08 shortly before the announcement. The share price rose to $77.77 in after-hours trading. The stock has lost about 16 percent of its value since the end of March and is trading 21 percent below its 52-week high of $99.10, reached on January 3.

The company’s global services sector was the only bright spot in its report for the quarter that ended in March. Global services rose 3 percent to $11.7 billion over the same period a year earlier. Mr. Bare said more customers are moving toward standardized IT services, and that IBM has long been strong in this market.

“This has always been important to IBM. Services has been a way for IBM to get in the door, do some consulting, maybe a little cross-selling,??? said Mr. Bare.

IBM officials had blamed last quarter’s poor showing on economic weakness in key European markets as well as in Japan. “In the past, European customers were handled differently than elsewhere in the world,??? said Mr. Bare.

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