IBM Corporation On Wednesday it announced 3,900 layoffs as part of some asset divestments and missed its annual cash target while beating revenue expectations in the fourth quarter.
Chief financial officer James Kavanaugh told Reuters the company was still “committed to hiring for client-facing research and development.”
IBM said the layoffs – related to the spinoff of its Kindrell business and a part of AI unit Watson Health – would lead to a $300 million charge in the January-March period.
Shares of the company fell two percent in extended trading, largely erasing earlier gains on upbeat results. Analysts said reports of job cuts and free cash flow miss are behind the decline.
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“It looks like the market is disappointed by the size of the announced job cuts, which were only 1.5 percent of its workforce,” said Jesse Cohen, senior analyst at Investing.com.
“Investors were expecting cost-cutting measures.”
From Big Tech to Wall Street banking majors, US companies are slashing costs to better deal with the global economic downturn.
IBM’s 2022 cash flow was $9.3 billion, well short of its $10 billion target, due to higher-than-expected working capital needs.
The company also forecast annual revenue growth in mid-single digits at constant currency terms, weaker than the 12 percent reported last year, as pandemic-led demand from customers for digitizing businesses took a hit amid fears of a recession. has given way to cautious spending.
In October, IBM showed softness in new bookings in Western Europe, while peer Accenture Plc saw weakness in its consulting business. In November Cognizant Technology Solutions Corp cut its 2022 forecast due to a pullback in contracts.
Growth of IBM’s software and consulting business slowed sequentially in the fourth quarter, but cloud spending was a bright spot, Amazon in 2022.
Its hybrid cloud revenue grew two percent in the quarter ended December 31.
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Total revenue during the period was flat at $16.69 billion, compared with analysts’ estimates of $16.40 billion, according to Refinitiv.
For 2022, IBM projects revenue growth of 5.5 percent, its highest in a decade.
(Reporting by Chavi Mehta in Bengaluru; Editing by Devika Syamnath)