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IBM Cuts 3,900 Jobs, Misses Cash Goal

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IBM Cuts 3,900 Jobs, Misses Cash Goal

(CTN News) – In a statement issued on Wednesday, IBM Corp. announced 3,900 layoffs as part of some asset divestitures. It also missed its annual cash target, dampening celebrations of exceeding revenue expectations in the fourth quarter.

It was reported by Reuters that the company’s chief financial officer, James Kavanaugh, had said that the company is still “committed to hiring for client-facing research and development positions”.

The layoffs – which result from the spinoff of the Kyndryl business and a part of IBM’s Watson Health AI unit – will result in a $300 million charge to IBM’s bottom line between January and March this year.

In extended trading, shares of the company fell 2%, erasing the gains that were seen earlier in the session on the back of largely upbeat results.

Among the factors that contributed to the decline in the stock market were news of job cuts and a miss on free cash flow.

It seems that the market has been disappointed with the size of the company’s recent announcements of job reductions. These reductions account for only 1.5% of the entire workforce, according to Jesse Cohen, senior analyst at Investing.com.

In response to the global economic downturn, US companies have been downsizing in earnest and slashing costs in earnest. Cost-cutting has been a major focus for US companies, from Big Tech to Wall Street banking majors.

The company generated $9.3 billion in cash in 2022, less than its target of $10 billion due to higher-than-expected working capital requirements.

According to the company, sales growth is forecast to be in the mid-single digits on a constant currency basis, weaker than the 12% reported last year, as the pandemic-driven demand for digitizing businesses has given way to cautious spending by clients amid rising recession fears.

IBM reported in October that it was experiencing softness in new bookings in Western Europe, while its rival Accenture plc reported weakness in its consulting business for the month.

According to a report in November by Cognizant Technology Solutions Corp., the company cut its forecast for 2022 because of a pullback in contracts.

While IBM’s software and consulting business growth slowed sequentially in the fourth quarter, cloud spending was a bright spot. Deal signings for setting up cloud services with partners such as Amazon.com AWS and Microsoft’s Azure are expected to double in 2022.

During the quarter ended December 31, the company’s hybrid cloud revenues increased by 2%.

According to Refinitiv, total revenue in the period was $16.69 billion, flat against analysts’ estimates of $16.40 billion. IBM’s revenue grew 5.5% in 2022, the company’s highest revenue growth in a decade.

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