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IBM lays off 3,900, joining an already long list of tech companies cutting jobs as economy cools

The reductions will amount to a “baseball” figure of 3,900, Chief Financial Officer James Kavanaugh said in an interview Wednesday. The cuts will focus on workers remaining after the spin-off of the Kyndryl and Watson Health units and will cost the company about $300 million, he said. IBM it still expects to hire in “higher-growth areas,” Kavanaugh said.

In its forecast, IBM said that free cash flow in fiscal 2023 is expected to be $10.5 billion, while revenue will increase in the mid-single 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 being helped by a weakening US dollar expected in 2023, Kavanaugh said. The effect of currency fluctuations is expected to be neutral overall in 2023: they will drag results in the first half while becoming a tailwind in the second half, she said.

Shares were down about 2% in extended trading after closing at $140.76 in New York. The stock is up 5.4% in 2022, one of the few major tech companies to gain value during the year.

Chief Executive Officer Arvind Krishna sought to transform Big Blue from its traditional information technology infrastructure and services business to the rapidly growing cloud computing market. The company’s revenue increased in 2022 for the second consecutive year after nearly a decade with no sales growth or decline.

Fourth-quarter revenue was unchanged at $16.7 billion, the New York-based Armonk’s company said in a statement. Analysts, on average, estimated $16.4 billion. Earnings excluding certain items were $3.60 per share in the period ended Dec. 31, while analysts expected $3.58 per share.

The outlook “signals continued demand for its consulting and software products,” Bloomberg Intelligence analyst Anurag Rana said in a note following the results. “Another key metric that impressed us was the full-year free cash flow outlook of $10.5 billion, which we believe now offers some flexibility to pursue a software acquisition, especially in light of the recent decline in ratings”.

Hybrid cloud revenues were $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 operate their own data centers in some combination with public cloud providers such as Amazonia.com Inc. and Microsoft Corp.

Sales in the software unit increased 2.8% to $7.29 billion, while infrastructure increased 1.6% to $4.48 billion. Analysts had expected declines in both categories. The consultancy gained 0.5% to $4.77 billion. Revenue produced by Red Hatthe acquired division that has been a key part of Krishna’s strategy, was up 10%, another relatively slow quarter for a unit that has regularly grown more than 20%.

IBM’s current workforce is 260,000, Kavanaugh said. That’s about 22,000 fewer than the disclosed figure for December 2021.