IBM is the latest big tech company to join the wave of layoffs rocking the sector. The company, which reported closing results for 2022 with sales up 5.5% to $60,530 million and profits down 71% to $1,639 million due to an extraordinary charge on pensions, is preparing to cut 1.5% of its workforce .
Treasury director James Kavanaugh said in an interview quoted by Bloomberg on Wednesday that the cuts will amount to an “approximate” number of 3,900 people. The cuts are focused on workers left over after the Kyndryl (technology infrastructure) and Watson Health (healthcare) units are spun off. The layoffs will cost the company around $300 million. IBM is still hiring in its “highest growth areas,” Kavanaugh said.
“Our strong performance in the fourth quarter capped a year in which we grew sales above our mid-single-digit model. Customers across all regions have increasingly adopted our hybrid cloud and AI solutions as technology continues to be a differentiating force in today’s business environment,” said Arvind Krishna, the company’s President and CEO, in the earnings statement. “Looking ahead to 2023, we expect full-year revenue growth in line with our model in the mid-single digits,” ie, 5%, he added.
IBM expects free cash flow of $10.5 billion this year. Both revenue growth and cash generation are ahead of analyst forecasts.
The Armonk, N.Y.-based company reported a fourth-quarter revenue decline that remained at $16,690 million, down $5 million from a year earlier, primarily due to the strength of the dollar, which is making revenue in other currencies difficult to convert into US currency converted to a smaller amount. The sales of the main divisions (software, consulting and infrastructure) grew, other sales burdened the total.
Krishna has sought to divert Big Blue from its traditional IT infrastructure and services businesses to the fast-growing cloud computing market, which has become a revenue driver. Hybrid cloud revenue was $22.4 billion in 2022, up 11% year over year (and 17% excluding currency effects).
Alphabet, Google’s parent company, will cut about 12,000 jobs worldwide, a figure nearly 6% of its workforce, to counter the flagging economy. Microsoft has announced about 10,000 job cuts and Amazon increased the number of layoffs to about 18,000 earlier this year. Last year, Meta announced job cuts of 11,000 people. Of the top five tech companies, only Apple has so far escaped massive job cuts.
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