IBM lays off 3,900, joins long list of tech companies cutting jobs as economy cools

International Business Machines delivered a lofty annual sales forecast as it announced it would cut about 1.5% of its global workforce, following similar job cuts over the past few months at many of its technology peers. .

The reductions amount to a “ballpark” number of 3,900, Chief Financial Officer James Kavanaugh said Wednesday in an interview. The cuts will focus on workers remaining after spinning off the Kyndryl and Watson Health units and will cost the company about $300 million, he said. IBM still hopes to hire in “higher growth areas,” Kavanaugh said.

In its forecast, IBM said free cash flow in fiscal 2023 is expected to be $10.5 billion while revenue will increase in the mid-single digits. Analysts, on average, estimated $9.18 billion in free cash flow and annual sales growth of 1.2%, according to data compiled by Bloomberg.

IBM is helped by a weakening US dollar expected in 2023, Kavanaugh said. The effect of currency fluctuations should be neutral in general in 2023 – they will drag the results in the first half while being a tailwind in the second half, he said.

Shares were down about 2% in extended trading after closing at $140.76 in New York. The stock is up 5.4% in 2022, one of the few major technology companies to have gained value in the year.

Chief Executive Officer Arvind Krishna is trying to pivot Big Blue from its traditional infrastructure and information technology services business to the fast-growing cloud-computing market. The company’s revenue increased in 2022 for the second consecutive year after nearly a decade of no growth or sales decline.

Fourth-quarter revenue was unchanged at $16.7 billion, the Armonk, New York-based company said in a statement. Analysts, on average, estimated $16.4 billion. Earnings, excluding certain items, were $3.60 a share for the period ended Dec. 31, while analysts had projected $3.58 a share.

The outlook “reflects steady demand for consulting and software products,” Anurag Rana, an analyst at Bloomberg Intelligence, said in a note after the results. “Another important measure we know is the free cash flow of $10.5 billion for the full year, which we believe now gives us the flexibility to pursue a software acquisition. , especially given the recent decline in estimates.”

Hybrid cloud revenue is $22.4 billion in 2022, up 11% from last year. Krishna’s strategy is focused on strengthening the company’s hybrid cloud offerings — serving customers who run their own data centers in some combination with public cloud providers such as Amazon.com Inc. and Microsoft corp.

Software unit sales increased 2.8% to $7.29 billion while infrastructure increased 1.6% to $4.48 billion. Analysts expect a decline in both categories. Consulting gained 0.5% to $4.77 billion. We are made of red hatthe acquired division which has been a key part of Krishna’s strategy, grew 10%, another relatively slow quarter for a unit that regularly posts growth above 20%.

IBM’s current headcount is 260,000, Kavanaugh said. That’s about 22,000 less than the number disclosed in December 2021.

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