IBM Corp. announced 3,900 layoffs on Wednesday as part of a series of asset divestments and missed its annual cash target, dampening cheer around beating fourth-quarter revenue expectations.
Chief Financial Officer James Kavanaugh told Reuters the company was still “committed to hiring for customer-centric research and development.”
The layoffs — related to the spin-off of its Kyndryl business and part of AI unit Watson Health — will trigger a $300 million charge in the January-March period, IBM said.
Shares of the company fell 2% in extended trading, wiping out previous gains on the largely optimistic results. Analysts said news of job cuts and missing free cash flow was to blame for the decline.
“It appears the market has been disappointed by the magnitude of the announced job cuts, which amounted to just 1.5% of the workforce,” said Jesse Cohen, senior analyst at Investing.com.
“Investors were hoping for deeper cost-cutting measures.”
From Big Tech to big Wall Street banks, US companies are seriously downsizing and cutting costs to better cope with the global economic downturn.
IBM’s cash flow in 2022 was $9.3 billion, below its target of $10 billion, due to higher-than-expected working capital needs.
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 consumer spending amid growing fears of a recession.
In October, IBM noted weakness in new bookings in Western Europe, while industry peer Accenture Plc noted weakness in its consulting business. Cognizant Technology Solutions Corp. lowered its 2022 forecast in November due to a downturn in contracts.
Growth in IBM’s software and consulting business slowed sequentially in the fourth quarter, but cloud spending was a bright spot, doubling in 2022 deal signings for setting up services with partners such as Amazon.com’s AWS and Microsoft’s Azure.
Hybrid cloud revenue increased 2% in the quarter ended December 31.
Total revenue remained flat at $16.69 billion for the period, compared to analyst estimates of $16.40 billion, according to Refinitiv.
For 2022, IBM posted revenue growth of 5.5%, the highest in a decade.
(Except for the headline, this story has not been edited by NDTV staff and is being published from a syndicated feed.)
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