The technology company IBM announced on Wednesday the layoff of 3,900 layoffs as part of some asset divestments and missed its full-year cash target, clouding expectations of beating revenue expectations in the fourth quarter.
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Chief Financial Officer James Kavanaugh told Reuters the company was still “committed to customer-focused research and development recruitment.” The layoffs, related to the spin-off of its Kyndryl business and a part of the Watson Health artificial intelligence unit, will generate a $300 million charge in the January-March period, the company said.
“The market appears to be disappointed by the size of the announced job cuts, which only amounted to 1.5% of its workforce,” said Jesse Cohen, a senior analyst at Investing.com. costs reduction”.
From big tech companies to major Wall Street banking firms, American companies have been downsizing and cutting costs to better cope with the global economic downturn.
IBM’s cash flow for 2022 was $9.3 billion, below its $10 billion target, due to higher-than-expected working capital needs. The company also forecast 1.5-digit annual revenue growth in constant currency terms, weaker than the 12% it reported last year, as pandemic-driven demand for business digitization has given way to cautious spending by customers amid growing recession fears.
Growth in IBM’s software and consulting business slowed sequentially in the fourth quarter, But cloud spending was a bright spot, with deal signings doubling in 2022 to set up services with partners like Amazon’s AWS and Microsoft’s Azure. Its hybrid cloud revenue increased 2% in the quarter ended December 31.
Total revenue was flat at $16.69 billion in the period, compared with analyst estimates of $16.40 billion, according to Refinitiv. By 2022, IBM posted 5.5% revenue growth, the highest in a decade.
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