Big Blue's Blues

IT WAS SHOCKING ENOUGH WHEN THE BLUEST OF America's blue-chip companies, IBM, announced last November that 20,000 of its 350,000 employees would either retire or resign by the end of this year. But when the estimate of departing workers doubled to 40,000 last week, the effect was numbing, both to the public and to the markets, where IBM stock is trading near its 10-year low. By the time the last pink slip and gold watch are handed out, the world's largest computer company will be but three-quarters the size it was in 1985.

IBM's downsizing will change not only the volume but the very nature of its business. The company announced last week that it would reduce its manufacturing capacity 40% by shrinking many of its 30 factories worldwide. More than half the cuts will come from facilities that make semiconductors; others from the mainframe business, weakened by the growing popularity of personal computers. To pay for the cutbacks, the company said it would take a $2.1 billion charge against earnings, a move that could make 1992 the second loss year in a row. Top IBMers are trained to look at the bright side. The cutbacks, they say, will reduce overhead by about $4 billion beginning in 1993.