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IBM cuts 3,900 jobs after muted consulting demand hits quarterly revenue

IBM Corp. said Wednesday it would lay off 3,900 people as part of a series of asset divestments and posted flat fourth-quarter revenue due to lackluster demand for its consulting services.
Big Blue spun off its large and lagging managed infrastructure company, now called Kyndryl, in late 2021 to focus on its hybrid cloud, where it helps customers set up a combination of their own data centers and leased computing resources. It also divested its healthcare data and analytics business from its AI company Watson Health.
The resulting layoffs will cost $300 million in the January-March period, IBM said.
But the company’s chief financial officer, James Kavanaugh, told Reuters on Wednesday that IBM would continue to hire in focus areas.
“Unlike many others in the past 2 to 2-1/2 years who hired tens of thousands of people…we are leveraging digitization, AI automation, which drives efficiency, but we are committed to hiring for customer-oriented research and development,” he said.
The company also forecasts annual revenue growth in the mid-single digits at constant currency, weaker than the 12% it reported last year, as pandemic-driven demand for corporate digitization has given way to cautious customer spending in light of growing recession fears.
IBM signaled weakness in new bookings in Western Europe in October, while industry peer Accenture Plc also noted weakness in its consulting business. Cognizant Technology Solutions Corp. lowered its 2022 forecast in November due to a downturn in contracts.
Still, Kavanaugh said the company sees its consulting business growing in terms of cloud spending. Deal signing doubled in 2022 to set up services with partners such as Amazon.com’s AWS and Microsoft’s Azure.
Hybrid cloud revenue increased 2% to $6.3 billion in the quarter ended December 31. Total revenue was $16.69 billion in the period, compared to analyst estimates of $16.40 billion, according to Refinitiv.
The 110-year-old company, which generates more than half of its sales outside the United States, said it expects a neutral currency impact on its business this year as the US dollar weakens. It posted a forex hit of over $1 billion in the fourth quarter.


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