IBM has revealed its plans for cutting 3,900 jobs as part of some asset divestments — after posting flat revenue growth in the fourth quarter.
IBM Chief Financial Officer James Kavanaugh told Reuters that the company was still committed to hiring for client-facing research and development.
The layoffs – related to the spinoff of its Kyndryl business and a part of AI unit Watson Health – will cause a $300 million charge in the January-March period, IBM said in its earnings results.
“It seems as if the market is disappointed by the size of its announced job cuts, which only amounted to 1.5 percent of its workforce,” said Jesse Cohen, senior analyst at Investing.com. “Investors were hoping for deeper cost-cutting measures.”
IBM’s 2022 cash flow was $9.3 billion, below its target of $10 billion, due to higher-than-expected working capital needs.
IBM has reported revenue of $16.7 billion (flat) in Q4 and $60.5 billion (+6 percent) in 2022. IBM’s Hybrid cloud revenue rose 11 percent to $22.4 billion last year.
IBM’s Software business generated revenue of $7.3 billion (+2.8 percent) thanks to growth of 5 percent in Hybrid Platform & Solutions, 10 percent in Red Hat, 4 percent in Automation, 4 percent in Data & AI, and 4 percent in Security business.
IBM’s Consulting Business generated revenues of $4.8 billion (+0.5 percent) thanks to growth of –1 percent in Business Transformation, + 1 percent in Technology Consulting, +2 percent in Application Operations.
IBM’s Infrastructure Business generated revenues of $4.5 billion (+1.6 percent) thanks to growth of 6 percent in Hybrid Infrastructure, 16 percent in IBM z Systems. IBM’s Distributed Infrastructure revenue was flat, while Infrastructure Support revenue fell 8 percent.
The company also forecast annual revenue growth in the mid-single digits on constant currency terms, weaker than the 12 percent it reported last year, as pandemic-led demand for digitizing businesses has given way to cautious spending by clients amid rising recession fears.
In October, IBM flagged softness in new bookings in Western Europe while peer Accenture noted weakness in its consulting business. Cognizant Technology Solutions in November cut its 2022 forecast due to a pullback in contracts.
IBM’s software and consulting business growth slowed down sequentially in the fourth quarter, but cloud spending was a bright spot, with deal signings doubling in 2022 for setting up services with partners such as Amazon.com’s AWS and Microsoft’s Azure.
IBM’s hybrid cloud revenue rose 2 percent in the quarter ended Dec. 31.
Total revenue was flat at $16.69 billion in the period.
For 2022, IBM recorded revenue growth of 5.5 percent, its highest in a decade.