International Business Machines issued an optimistic annual sales forecast while announcing the cut of around 1.5% of its global workforce, following similar job cuts in recent months by many of its technological peers.
The cuts will amount to an “approximate” figure of 3,900, chief financial officer James Kavanaugh said in an interview on Wednesday. The cuts will focus on workers remaining after the fallout from the Kyndryl and Watson Health units and will cost the company about $300 million, he said. IBM still expects to hire in “higher growth areas,” Kavanaugh said.
In its guidance, IBM said free cash flow for fiscal 2023 is expected to be $10.5 billion, while revenue will grow in the mid-digits. Analysts on average estimated free cash flow of $9.18 billion and annual sales growth of 1.2%, according to data compiled by Bloomberg.
IBM is helped by a weakening U.S. dollar expected in 2023, Kavanaugh said. The effect of currency swings should be broadly neutral in 2023 – they will weigh on results in the first half while becoming a tailwind in the second half, he said.
Chief executive Arvind Krishna has tried to pivot Big Blue from its traditional infrastructure services and information technology business into the growing cloud computing market. The company’s revenue increased in 2022 for the second consecutive year after nearly a decade of no growth or decline in sales.
Fourth-quarter revenue was flat at $16.7 billion, the Armonk, New York-based company said in a statement. Analysts estimated an average of $16.4 billion. Earnings excluding certain items were $3.60 per share for the period ended December 31; analysts had expected $3.58 per share.
Hybrid cloud revenue was $22.4 billion in 2022, up 11% from the prior year. Krishna’s strategy has focused on strengthening the company’s hybrid cloud offerings, providing services to customers who run their own data centers in combination with public cloud providers such as Amazon.com and Microsoft.
IBM’s current workforce is 260,000, Kavanaugh said. This is around 22,000 less than the figure disclosed for December 2021.