International Business Machines (IBM) joins the layoff spree with other tech giants such as Google, Amazon, Meta, Twitter and other digital titans. IBM fired 3,900 employees as part of some asset disinvestment on Wednesday.
Since IBM missed its yearly cash target, the excitement surrounding exceeding revenue projections in the fourth quarter has been dampened.
In another development, SAP, a German software corporation looking to slash expenses and concentrate on its cloud business, announced on Thursday that it planned to cut 3,000 employees or 2.5% of its global workforce and explore the sale of its remaining investment in Qualtrics.
Chief Financial Officer James Kavanaugh said the business was still dedicated to hiring for client-facing research and development in a statement to Reuters.
The job cuts will stem from Kyndryl Holdings, the IT services business that IBM spun off last year, and its healthcare divestiture, from which the company will incur about a USD 300 million charge, an IBM spokesman told WSJ.
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"We have taken a number of significant portfolio actions over the last couple of years, which has resulted in some stranded costs in our business," he said during the company`s earnings call late on Wednesday.
"We expect to address these remaining stranded costs early in the year and anticipate a charge of about $300 million in the first quarter," Kavanaugh added.
According to Jesse Cohen, senior analyst at Investing.com, the market appears to be unimpressed by the scale of the company's planned job losses, which only represented 1.5% of its personnel.
“Investors were hoping for deeper cost-cutting measures," the analyst added.
Due to higher-than-anticipated working capital requirements, IBM's cash flow in 2022 was $9.3 billion, falling short of its forecast of $10 billion.
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The company also expects lower yearly sales growth than the 12% it posted last year, in constant currency terms, as customer caution over mounting recession fears has replaced the pandemic-driven need for business digitization.
While competitor Accenture Plc indicated difficulties in its consultancy sector, it also signalled a slowdown in new bookings in Western Europe in October, according to Reuters.
In the fourth quarter, IBM's software and consultancy business growth fell sequentially, but cloud expenditure was a bright light, with deal signings for setting up services with partners like Amazon.com's AWS and Microsoft's Azure doubling in 2022.
IBM reported sales growth of 5.5% in 2022, the highest level in a decade.
