IBM’s fourth-quarter performance exceeds expectations, plans to lay off 3,900 people

According to news on January 26, IBM Chief Financial Officer James Kavanaugh (James Kavanaugh) said on Wednesday local time that the company will “roughly” cut 3,900 jobs, accounting for 1.5% of the total number of IBM employees worldwide.

He said the round of layoffs, which will cost about $300 million in total, will primarily target employees left over from the spinoffs of Kyndryl and Watson Health. Kavanaugh said IBM would still be hiring more in “high-growth areas.”

IBM released its financial results for the fourth quarter and full year of 2022 on Wednesday. The company earned an adjusted $3.60 per share in the fourth quarter, compared with analysts’ average estimate of $3.58; revenue was $16.7 billion, compared with analysts’ average estimate of $16.4 billion.

Free cash flow is expected to reach $10.5 billion in fiscal 2023, while annual revenue will grow by mid-single digits, IBM said. Analysts expect free cash flow of $9.18 billion and annual sales growth of 1.2%.

Kavanaugh said the dollar is expected to continue to weaken in 2023, which is good for IBM. He said that by 2023, the impact of exchange rate fluctuations should be generally neutral, negatively affecting performance in the first half of the year and becoming a positive factor in the second half of the year.

IBM shares were down about 2 percent at $140.76 in after-hours trading in New York. Shares of the company are up 5.4% for the full year of 2022, making it one of the few big tech companies to increase in market capitalization last year.

IBM Chief Executive Arvind Krishna (Arvind Krishna) has been shifting the company’s main business from traditional infrastructure and information technology services to fast-growing cloud computing services. After nearly 10 years of no growth or decline in the company’s revenue, the company’s revenue will grow for the second consecutive year in 2022.

The outlook “suggests steady demand for IBM’s consulting services and software products,” Bloomberg analyst Anurag Rana said in a note after the earnings report. “Another key metric for us is the full-year 2023 free cash flow forecast of $10.5 billion, which we think will give the company some flexibility to make software acquisitions, especially given the recent Valuations are down.”

In 2022, IBM’s hybrid cloud business revenue will be US$22.4 billion, an increase of 11% year-on-year. Krishna’s strategy has been focused on supporting the company’s hybrid cloud offering, or offering services to customers who run their own data centers in conjunction with public cloud providers such as Amazon and Microsoft.

IBM’s software division’s fourth-quarter revenue rose 2.8% year-on-year to $7.29 billion; the infrastructure sector’s fourth-quarter revenue increased 1.6% year-on-year to $4.48 billion. Analysts had expected revenue figures for both categories to decline. In the fourth quarter, IBM’s consulting business revenue increased by 0.5% year-on-year to $4.77 billion. IBM-acquired Red Hat, a key part of Krishna’s transformation strategy, saw revenue growth of 10% year-over-year, a slowdown from the previous 20% growth.

Kavanaugh said that IBM’s current total number of employees is 260,000, which is about 22,000 fewer than the number announced in December 2021. (Chenchen)