IBM Corp, like other tech behemoths, has joined the ‘layoff drive,’ firing 3,900 employees on Wednesday. According to the tech hub, the layoff drive was part of some asset divestments. The company has missed its annual cash target, putting a damper on hopes of exceeding revenue expectations in the fourth quarter.
Chief Financial Officer James Kavanaugh told that the company was still committed to hiring for client-facing research and development. IBM said in a statement that the layoffs are related to the spinoff of its Kyndryl business and a portion of its AI unit Watson Health.
According to Report, the layoffs will cost IBM Corp $300 million in the January-March period, and its shares fell 2% in extended trading. According to Jesse Cohen, senior analyst at Investing.com, the market appears to be disappointed by the size of the announced job cuts, which only accounted for 1.5% of the workforce.
IBM’s cash flow in 2022 was $9.3 billion, falling short of its target of $10 billion due to higher-than-expected working capital requirements.
The company also forecasts that annual revenue growth will be in the mid-single digits in constant currency terms, down from the 12% reported last year, as pandemic-driven demand for digitising businesses has given way to cautious spending by clients amid rising recession fears.
It also reported softness in new bookings in Western Europe in October, while peer Accenture Plc reported weakness in its consulting business, according to Reports. The fourth-quarter growth of IBM’s software and consulting businesses slowed sequentially, but cloud spending was a bright spot, with deal signings doubling in 2022 for setting up services with partners such as Amazon.com’s AWS and Microsoft’s Azure.
In the quarter ended December 31, its hybrid cloud revenue increased by 2%. However, its total revenue was flat in the period, at $16.69 billion, compared to analysts’ estimates of $16.40 billion, according to Refinitiv.
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