IBM is laying off 3,900 employees, the company announced on Wednesday. It said that the firings were part of some asset divestments and because it missed its annual cash target. The layoffs will cause a $300 million charge in the January-March period, IBM said.
Chief Financial Officer James Kavanaugh told Reuters that the company was still “committed to hiring for client-facing research and development”.
The latest decision is related to the spinoff of its Kyndryl business and a part of AI unit Watson Health.
News of the job cuts and free cash flow miss are being seeing as reason behind a two per cent drop in company shares in extended trading.
“It seems as if the market is disappointed by the size of its announced job cuts, which only amounted to 1.5 per cent of its workforce,” said Jesse Cohen, senior analyst at Investing.com.
“Investors were hoping for deeper cost-cutting measures.”
It has forecast its annual revenue growth in the mid-single digits on constant currency terms, weaker than the 12 per cent it reported last year. This comes as pandemic-led demand for digitizing businesses has given way to cautious spending by clients amid rising recession fears.
IBM’s software and consulting business growth slowed down sequentially in the fourth quarter. However, deal signings doubled in 2022 in cloud spending.
Its hybrid cloud revenue rose two per cent in the quarter ended December 31.
Economic woes across sectors, from Big Tech to Wall Street banking majors, have forced several US to downsize as a cost-cutting measure.
Spotify is cutting six per cent of its workforce, or roughly 600 roles.
Alphabet Inc is eliminating 12,000 jobs, a memo by its chief executive said.
Microsoft announced that it would cut 10,000 jobs by the end of the third quarter of fiscal 2023.
Amazon’s company-wide layoffs would impact over 18,000 employees.
Meta, the Facebook-parent, is also cutting 13 per cent of its workforce, or more than 11,000 employees.
IBM’s 2022 cash flow was $9.3 billion, below its target of $10 billion, due to higher-than-expected working capital needs.
Intel, Lyft, Salesforce, Cisco, HP, Goldman Sachs are some other companies that have laid off several employees recently.
(With inputs from agencies)
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