IBM cuts 3,900 jobs and misses annual cash target

Jan 25 (Reuters) – IBM Corp (IBM.N) on Wednesday announced 3,900 layoffs as part of some asset disposals and missed its annual cash target, dampening fourth-quarter revenue expectations .

Chief Financial Officer James Kavanaugh told Reuters the company was still “committed to hiring for customer-facing research and development.”

The layoffs — related to the spin-off of its Kyndryl business (KD.N) and part of the AI ​​unit Watson Health — will result in a $300 million charge in the January-March period, IBM said.

Shares of the company fell 2% in extended trading, erasing earlier gains on the largely upbeat results. Analysts said news of the job cuts and the loss of free cash flow were behind the decline.

“It appears the market is disappointed with the magnitude of the announced job cuts, which were only 1.5% of its workforce,” said Jesse Cohen, senior analyst at Investing.com.

“Investors were hoping for greater cost-cutting measures.”

From big tech to Wall Street banking majors, American companies have been seriously downsizing and cutting costs to better weather the global economic downturn. Read more

IBM’s cash flow in 2022 was $9.3 billion, below its target of $10 billion, due to higher-than-expected working capital requirements.

The company also forecasts mid-digit annual revenue growth at constant currencies, lower than the 12% reported last year, as pandemic-driven demand for enterprise digitization gave way to spending. cautious on the part of clients in a context of growing fears of recession.

In October, IBM reported weakness in new bookings in Western Europe, while peer Accenture Plc noted weakness in its consulting business. Cognizant Technology Solutions Corp (CTSH.O) cut its 2022 forecast in November due to a pullback in contracts.

Growth in IBM’s software and consulting business slowed sequentially in the fourth quarter, but cloud spending was a bright spot as deal signings doubled in 2022 to set up services with partners such as Amazon.com’s AWS (AMZN.O) and Microsoft’s (MSFT.O) Azure.

Its hybrid cloud revenue grew 2% in the quarter ended Dec. 31.

Total revenue was flat at $16.69 billion in the period, versus analysts’ estimates of $16.40 billion, according to Refinitiv.

For 2022, IBM reported revenue growth of 5.5%, its highest in a decade.

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Reporting by Chavi Mehta in Bengaluru; Editing by Devika Syamnath

Our standards: The Thomson Reuters Trust Principles.

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