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IBM’s Buffalo venture reflects strategic push amid technological change

IBM’s planned new venture in Buffalo reflects the path that the technology services and consulting giant has chosen as it tries to keep pace with sweeping changes in technology.

The Buffalo project also illustrates how the massive company continues to restructure, pledging to create 500 jobs here even as it prepares to cut jobs elsewhere in its vast operations.

The Dutchess County-based company has undergone radical changes over the last two decades, a transformation that has led to thousands of job cuts in places such as the mid-Hudson Valley and the Binghamton area. Even so, IBM remains a huge global presence, with about 400,000 employees and operations in about 170 countries.

But IBM, one of 30 companies included in the Dow Jones industrial average, is under pressure from Wall Street to bolster its stock price and improve its performance after seven consecutive quarterly declines in revenues. For all of 2013, the company recorded profits of $16.5 billion, down 1 percent from the year before.

A company once best known for producing computer hardware has turned its attention over the years to software and technology services to drive its growth. The supercomputer system (and “Jeopardy!” champ) called Watson is one example of the innovation that IBM wants to highlight and apply to customers’ needs.

“We’ve been very focused on the evolution of data as an IBM company,” said Michael J. Cadigan, head of IBM’s microelectronics systems and technology group. “As you can imagine, given what we see occurring in the industry in general, there is a need for the industry and IBM to be in a leadership position as we think about data innovation.”

Some of IBM’s recent deals and investments reinforce the company’s strategic shift.

Last year, IBM spent $2 billion to acquire cloud computing services company SoftLayer. Bloomberg News reported Monday that IBM will spend more than $1 billion on development of cloud software through 2015, and just last month, the company committed $1.2 billion toward adding 15 new data centers.

Meanwhile, IBM has agreed to sell its low-end server business to a Chinese company, Lenovo, for $2.3 billion. And the Financial Times this month reported that IBM was exploring the idea of selling its semiconductor business.

While the Buffalo Niagara region celebrates an economic win with IBM, the Binghamton area and the mid-Hudson Valley are bracing for more job cuts by the same company, perhaps as early as this week. Some mid-Hudson lawmakers have lashed out at IBM for cutting jobs despite receiving lucrative incentives from the state.

IBM remains a major employer in that area, with about 7,000 employees, though published reports say that at one time the figure was about 30,000.

IBM’s employment also has shrunk dramatically in Endicott, where IBM began, in the Southern Tier, said Lee Conrad, national coordinator of Alliance@IBM/Communications Workers of America Local 1701. The organization does not have a collective-bargaining agreement with IBM.

“It’s a little disingenuous to call IBM a job creator” in the face of its job cuts in the state and elsewhere in the country, Conrad said.

Gov. Andrew M. Cuomo’s office Monday announced an agreement designed to protect 3,100 IBM jobs in the Hudson Valley and surrounding areas. The deal, between the SUNY College of Nanoscale Science and Engineering and IBM, calls for the company to maintain 2,350 jobs along with 750 jobs in its semiconductor plants and related fields in Dutchess County, Albany and Yorktown Heights, through at least the end of 2016.