International Business Machines Corp (IBM) delivered an upbeat annual sales forecast while announcing it would eliminate about 1.5 percent of its global workforce, following similar job cuts over the past few months by many of its technology peers.
The planned reductions amount to a “ballpark” figure of 3,900, IBM chief financial officer James Kavanaugh said on Wednesday.
The cuts are to focus on workers remaining after spinning off the Kyndryl and Watson Health units, Kavanaugh said, adding that IBM still expects to hire in the “higher-growth areas.”
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IBM said in its forecast that free cash flow this fiscal year is expected to be US$10.5 billion, while revenue should increase in the mid-single digits.
Analysts estimated US$9.18 billion of free cash flow and annual sales growth of 1.2 percent, data compiled by Bloomberg showed.
IBM is being helped by expectations that the US dollar will weaken this year, Kavanaugh said.
The effect of currency fluctuations should be neutral overall this year, dragging on results in the first half while becoming a tailwind in the second, he said.
IBM CEO Arvind Krishna has been trying to pivot to the fast-growing cloud-computing market from the firm’s traditional business of infrastructure and information-technology services. The company’s revenue increased last year for the second consecutive year after almost a decade of no growth or slipping sales.
Fourth-quarter revenue was unchanged at US$16.7 billion, IBM said in a statement, while analysts estimated US$16.4 billion.
Earnings, excluding some items, were US$3.60 a share in the period ending Dec. 31, while analysts projected US$3.58 a share.
The outlook “signals steady demand for its consulting and software products,” Bloomberg analyst Anurag Rana said in a note after the results. “Another key metric that stood out to us was the free cash-flow outlook of US$10.5 billion for the full year, which we believe now gives it some flexibility to pursue a software acquisition, especially given the recent decline in valuations.”
Hybrid cloud revenue was US$22.4 billion last year, up 11 percent from a year earlier. Krishna’s strategy has been focused on bolstering the company’s offerings in hybrid cloud — providing services to customers that run their own data centers in some combination with public cloud providers such as Amazon.com Inc and Microsoft Corp.
Sales in the software unit increased 2.8 percent to US$7.29 billion while infrastructure was up 1.6 percent to US$4.48 billion. Analysts had expected declines in both categories.
Consulting gained 0.5 percent to US$4.77 billion. Revenue produced by Red Hat, the acquired division that has been a key part of Krishna’s strategy, increased 10 percent, another comparatively slow quarter for a unit that regularly posted growth of more than 20 percent.
IBM’s workforce is 260,000, Kavanaugh said, about 22,000 lower than the figure reported in December 2021.
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