Following suit of other tech giants, IBM Corp on Wednesday announced its decision to sack 3,900 employees. The decision comes as part of IBM’s asset divestments and also due to the company failing to achieve its annual cash target.
IBM Chief Financial Officer James Kavanaugh said that the company was still "committed to hiring for client-facing research and development" as reported by Reuters.
According to the official statement by IBM, the layoffs are connected to the spinoff of its Kyndryl business and a part of its AI unit Watson Health. The company expects a $300 million charge in the January to March period.
The lay-offs come after rising expectations of beating revenue targets in the fourth quarter. Missed cash target along with the announcement of lay-offs has resulted in a 2% fall in its share value 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% of its workforce," said Jesse Cohen, senior analyst at Investing.com. He explained that investors were hoping for more intensive cost-cutting measures.
In 2022, IBM’s cash flow was $9.3 billion against a target of $10 billion, which was due to higher-than-expected working capital needs.
IBM also pegged its annual revenue growth in mid-single digits in constant currency terms, which is significantly less as compared to the 12 per cent it reported last year. It also flagged softness in new bookings in Western Europe in October.
The company’s software and consulting business growth witnessed a downtrend in the fourth quarter. However, cloud spending was impressive, with deal signings doubling in 2022 for setting up services with partners such as Amazon and Microsoft.
IBM’s mass lay-off is in trend with Big Tech to Wall Street banking majors as most US companies have been reducing their workforce and cutting down expenses to better adjust to the global economic downturn.
