IBM to Cut 3,900 Jobs Amid Tech Layoff Trend

A sign marks the entrance to IBM Corporate Headquarters in Armonk, New York, on Mar. 20, 2009. (Stan Honda /AFP via Getty Images)

Technology firm IBM plans on reducing its headcount by 3,900 jobs, the company announced Wednesday, while delivering better-than-expected fourth-quarter revenue results and joining a host of big tech companies that are also laying off employees.

The layoffs account for roughly 1.5 percent of IBM’s total global workforce. The latest round of job cuts will focus on employees who remain after IBM spins off its IT services business Kyndryl, based in New York, and Michigan-based healthcare operation Watson Health, CFO James Kavanaugh said in a Bloomberg interview on Wednesday.

Kyndryl officially separated from IBM in November. Watson Health was acquired by Francisco Partners in July 2022 and renamed Merative.

The cuts will cost the company roughly $300 million, he stated, while adding that IBM intends to hire in “higher-growth areas.” While speaking to Reuters, Kavanaugh said that the firm is “committed to hiring for client-facing research and development.”

A spokesperson from IBM told CNN that the job cuts were solely related to the reorganization of the two business units and is “not an action based on 2022 performance or 2023 expectations.”

IBM shares fell on Jan. 25. “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.”

Beating Revenue Expectations

On Wednesday, IBM reported its fourth-quarter earnings results, registering higher-than-expected revenues. However, free cash flow and operating profit came in lower than predicted. Revenue fell slightly, to $16.69 billion in fourth quarter 2022, from $16.70 billion in fourth quarter 2021.

However, revenues were higher than analyst expectations of $16.4 billion, according to financial data firm Refinitiv. Analysts had expected revenues to fall for the first time in two years. Instead, IBM’s fourth-quarter revenues remained flat.

For fourth quarter 2022, IBM reported $2.71 billion in net income, compared to $2.33 billion in fourth quarter 2021. The company saw revenue from software rise by 2.8 percent, infrastructure by 1.6 percent, and consulting by 0.5 percent. Financing revenue saw a decline of 0.4 percent.

Sales for the fourth quarter remained mostly flat, with a strong U.S. dollar said to have hurt its reported revenue by more than $1 billion.

When IBM CEO Arvind Krishna was asked during a conference call about IBM’s outlook for enterprise tech in 2023 during a conference call, he said that most of the company’s clients believe they will “emerge stronger,” according to CNN. Despite the various “headwinds” in 2023, IBM is “seeing them double down.”

Even though many tech firms have given downbeat forecasts of late, IBM remains “optimistic” about its future because the company has “no consumer business,” Krishna pointed out.

“So I think, consequently, we might be seeing a little bit different subset of the economy than those who might have a large direct exposure to a consumer business.”

Tech Sector Job Cuts

With the 3,900 job cuts, IBM joined major tech firms like Alphabet, Microsoft, and Amazon in laying off employees this year. Amazon announced 18,000 layoffs amounting to roughly 6 percent of the company’s corporate employees worldwide.

Alphabet, which owns Google, plans on terminating 12,000 employees, amounting to 6 percent of its workforce. Microsoft is terminating 10,000 employees in 2023, and Salesforce is laying off 8,000.

A Jan. 5th report by Challenger, Gray & Christmas states that U.S. employers announced plans to cut 363,824 jobs in 2022, up 13 percent from 2021. The tech sector led in such announcements with 97,171 layoffs. This was up 649 percent from 2021.

According to Stacie Haller, executive recruiter and career counselor at ResumeBuilder.com, the tech sector is responsible for the recent layoffs as they are “right-sizing” after the industry over-hired employees.

“With unknown variables in the workforce regarding not only internal workforce issues but also the changing culture around working today, hiring freezes may be a safer policy for companies to implement before layoffs are needed. With the talk of a recession, this may be what we will see in the coming months,” said Haller.