International Business Machines Corp. is planning to eliminate about 10,000 jobs from its European services unit to cut costs ahead of a spinoff of the division next year, according to a report today from Bloomberg.

The job cuts would affect about 20% of IBM staff in the region, with the biggest cuts coming to offices in the U.K. and Germany. Offices in Poland, Slovakia, Italy and Belgium will also reportedly see their headcounts cut as well.

The report says IBM announced the job cuts earlier in November during a meeting with labor representatives. IBM has neither denied not confirmed the reporting, saying in a statement that “our staffing decisions are made to provide the best support to our customers in adopting an open hybrid cloud platform and AI capabilities.”

IBM announced plans in October to spin off its $19 billion managed infrastructure services unit into a separate company by the end of 2021. Chief Executive Officer Arvind Krishna said at the time that the spinoff will free up IBM to focus on its higher-margin and higher-growth hybrid cloud business.

“IBM has always transformed itself to better help clients move from one technological era to the next,” Krishna said. “This is the through-line that connects all of the important moments that mark our rich history. From punch cards, to vacuum tubes, to transistors, to mainframes, to PCs and now hybrid cloud and AI — the history of IBM is largely the story of a company set on a path of continuous transformation.”

Dave Vellante, chief analyst at SiliconANGLE sister market research firm Wikibon and co-host of SiliconANGLE’s video studio theCUBE, noted at the time that the move makes sense both financially and strategically. “Once again, IBM is shedding lower-margin, nonstrategic operations in an attempt to streamline its business and get on a consistent growth trajectory,” Vellante said. “For years IBM has been on this path, for example with its x86 server and microelectronics businesses.”

The shift away from legacy systems to a hybrid cloud focus for IBM has been driven in part by its acquisition of Red Hat Inc. for $34 billion in July 2019, a point made by Krishna in an interview with CNBC earlier this month.

“The Red Hat acquisition gave us the technology base on which to build a hybrid cloud technology platform based on open-source and based on giving choice to our clients as they embark on this journey,” Krishna said. “With the success of that acquisition now giving us the fuel, we can then take the next step, and the larger step, of taking the managed infrastructure services out.”

Image: IBM