The wave of companies cutting workers continued on Wednesday with International Business Machines Corp (IBM). The company will cut around 3,900 jobs.
According to a spokesman, the reductions will come from Kyndryl Holdings Inc., an IBM spin-off company that provides IT services and is expected to face a $300 million charge due to its healthcare sale.
According to the company’s most recent annual report, the layoffs would amount to a 1.4% decrease in its headcount of 280,000. The IT firm’s fourth-quarter results were flat, with the stronger US dollar accounting for more than $1 billion in reported sales. What could be the reasons leading the company to such drastic measures?
Let’s Try to Justify the Move with Some of IBM’s Financials
Net income increased to $2.71 billion for the fourth quarter, compared with $2.33 billion a year before, according to Thomson Reuters Estimates. According to analysts, adjusted earnings of $3.60 per share were just shy of estimates of $3.59 per share. From $16.70 billion a year ago, revenue declined to $16.69 billion. Analysts predicted $16.15 billion, according to FactSet.
Several of the company’s segments saw an increase in revenue over the prior-year period, including Armonk, NY. Consulting increased 0.5% to $4.8 billion, while infrastructure increased 1.6% to $4.5 billion, resulting in a total gain of 2.8%. IBM’s financial performance decreased by 0.4% to $200 million in the previous fiscal year.
Concerns about the economy and a potential recession have slowed down technology company spending, which has impacted large technology companies. As a result, a slew of recent layoffs has occurred. Microsoft Corporation has announced layoffs as well. Demand for its software and cloud services declined in its latest quarter. Hence, it saw its slowest sales growth in more than six years.
According to IBM, hybrid cloud sales are expected to reach $22.4 billion by 2022. IBM predicted revenue growth of mid-single digits over the next several years, along with about $10.5 billion in total free cash flow for the year.
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