IBM ships jobs to India

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It says a lot about the state of the economy when one of the most profitable companies in America cuts jobs in the US and relocates the positions to India.

International Business Machines Corp (IBM) appears to be taking that route. Despite reporting a 12 percent gain in earnings in the fourth quarter, Big Blue plans to reduce its American workforce as it adds more positions in India. So if you're an engineer looking for work, don't let IBM's enviable profits fool you: they're not hiring, at least not in the USA.

According toThe Wall Street Journal, "International Business Machines Corp. is expected to inform a large number of U.S. employees in its global-business services unit that their jobs are being eliminated, with the work of many of them being transferred to IBM employees in India." The paper said it was not sure how many people are involved but it is believed to be in the thousands.

The assumption, which is almost certainly correct, is that the decision is based on cheap labor costs in India. Outsourcing jobs overseas has been less common recently as the cost of labor in developing nations has risen with an improving economy. In a recession, that trend of increasing labor costs may be reversing itself even in countries like India where a large portion of the population is well-educated.

The stock market has been sanguine about IBM's future and it has issued strong earnings forecasts for this year. Its shares are up 15 percent YTD. IBM has $13 billion in cash and had an operating income of $17 billion last year.

But, business is business.

Douglas A. McIntyre is an editor at 24/7 Wall St.

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