IBM to Cut 20,000 in a Restructuring : Computers: The reorganization is aimed at breaking the firm up into independent and more adaptable business units.

International Business Machines Corp., searching for ways to reverse a frightening falloff in sales and profit, said Tuesday that it will cut another 20,000 jobs next year and undertake a major overhaul of the way it does business.

The world’s largest computer company said it will take a $3-billion writeoff in the fourth quarter to cover the job cuts and other restructuring costs. But it said it will retain its no-layoff policy, relying on attrition and early retirement incentives to reduce its work force.

The reorganization is aimed at breaking notoriously bureaucratic IBM into independent business units that will be more nimble and better able to adapt to the frantic pace of change in the highly competitive computer industry.

Although some analysts were skeptical that the latest moves would be enough to turn IBM around, Wall Street reacted favorably to the news. IBM’s stock rose $2.75 to $97.875 in heavy trading on the New York Stock Exchange.

Until last year the most profitable company in the world, IBM has seen its sales fall and its profit virtually disappear as it has struggled to adapt to a stagnant computer market--one in which buyers increasingly view computer products as commodities whose price is the most important factor.

Smaller, younger computer companies that don’t have the administrative overhead of IBM--or its enormous investments in research, development and manufacturing--have been able to win big chunks of the market.

Venerable IBM, based in Armonk, N.Y., has already taken some drastic steps. Employment is down from 407,000 to 353,000 worldwide even before the latest round of cuts, and IBM made a major break from tradition in July when it announced a wide-ranging alliance with archrival Apple Computer.

The reorganization announced Tuesday could portend the most radical changes yet. Details of the plan remain sketchy, but Chairman John Akers said that in the future, some IBM business units will report financial results separately. They’ll also be free to develop relationships with other companies.

An IBM regional sales organization in Southern California, for example, might decide in some situations to offer non-IBM computers to its customers. By the same token, IBM manufacturing units might begin selling components or even entire computer systems to other companies, who could resell them under their own names.

Quinn Mills, a Harvard Business School professor who has written a book about IBM, said this type of overhaul would be especially difficult for IBM, because its strength has always been a high degree of integration among its far-flung businesses.

Moving to an independent business unit structure would be a slow, difficult process, he said.

IBM indicated that the decentralization would take place gradually and that some businesses would ultimately enjoy more autonomy than others. Eventually, Akers said, the company will scale back investment in business units with minimal returns and some operations might even be sold.

Observers say it will take time to determine what parts of the company are uncompetitive.

IBM also said the compensation of executives running the individual business units will be closely tied to profit performance--a step some analysts consider crucial to restoring the company’s vitality.

In sticking with the no-layoff policy, IBM invited criticism from analysts who say that early retirement incentives are an expensive way to cut a work force and often backfire by encouraging the most productive employees to leave.

But Mills and others said the company had lately done a much better job of targeting the incentives and added that avoiding layoffs was both humane and important for sustaining morale.

At the same time, IBM has been stiffening employee review procedures and firing marginal employees--to the point where Frank Gens of Technology Investment Strategies called the no-layoff stance “a bit of a semantic game.”

And morale has clearly suffered. One IBM employee called the new review procedures “real nasty stuff” that is producing discord among the rank and file. As for the reorganization and other cost-cutting measures, he said: “We’re used to it by now. This has been going on for two or three years. It’s just producing one more sigh on our part.”

Times staff writer Carla Lazzareschi contributed to this story.