© Reuters. FILE PHOTO: A man stands near the IBM logo at Mobile World Congress in Barcelona, Spain, February 25, 2019. REUTERS/Sergio Perez//File Photo
By Chavi Mehta
(Reuters) – IBM (NYSE:) Corp on Wednesday announced 3,900 layoffs as part of divesting some assets and falling short of its annual cash target, denting the cheer around beating business expectations. revenue in the fourth quarter.
Chief Financial Officer James Kavanaugh told Reuters the company remained “committed to hiring for customer-driven research and development”.
IBM said the layoffs — related to Kyndryl’s side business and part of its AI unit Watson Health — would result in a $300 million charge between January and March.
The company’s shares fell 2% in extended trading, erasing earlier gains on the upbeat results. Analysts said news of job cuts and missed free cash flow were to blame for the drop.
Jesse Cohen, senior analyst at Investing.com, said: “It looks like the market is getting frustrated with the size of the job cuts announced, which represent just 1.5% of their workforce.
“Investors were hoping for deeper cost-cutting measures.”
From Big Tech to Wall Street banking, US companies have seriously downsized and cut costs to better cope with the global recession.
IBM’s 2022 cash flow is $9.3 billion, below its $10 billion target due to higher-than-expected working capital needs.
The company also forecasts single-digit year-over-year revenue growth in constant currency terms, lower than the 12% it reported last year, driven by digitalisation demand driven by the global economy. The pandemic has given way to cautious spending by customers amid growing recession fears.
In October, IBM flagged weakness in new bookings in Western Europe while peer company Accenture (NYSE:) Plc recorded weakness in its consulting business. Cognizant Technology Solutions (NASDAQ:) Corp in November cut its 2022 forecast due to contract retractions.
IBM’s software and consulting business growth slowed steadily in the fourth quarter, but cloud spending was a bright spot, with deal signings doubling in 2022 to establish services with partners like Amazon.com’s AWS (NASDAQ:) and Azure’s Microsoft (NASDAQ::).
Its hybrid cloud revenue grew 2% in the quarter ended December 31.
Total revenue was flat at $16.69 billion for the period, compared with analyst estimates of $16.40 billion, according to Refinitiv.
In 2022, IBM recorded revenue growth of 5.5%, the highest level in a decade.
IMAGE: IBM reports highest annual revenue growth in a decade (https://www.reuters.com/graphics/IBM-RESULTS/gdvzqwomjpw/chart.png)