IBM to cut 3,900 jobs globally

US-tech major International Business Machine (IBM) said on Wednesday that it will cut about 3,900 jobs which is about 1.5% of its global workforce, the latest sign that layoffs are accelerating in the US technology sector as companies brace for an economic downturn.   

On a separate report on Thursday Bloomberg mentioned that Lam Research, one of the three biggest providers of chip-manufacturing equipment in the US, will eliminate about 1,300 jobs worldwide which is about 7% of its workforce to reduce expenses in a declining market. 

The company’s chief financial officer (CFO) James Kavanaugh told Bloomberg News that those cuts will “focus on workers who remained on IBM payroll following the company’s divestment from Kyndryl and the spinoff of Watson Health”. Kyndryl was spun-off of IBM IT infrastructure services in November 2021. Kavanaugh also added that IBM will continue to hire in “higher-growth areas”.   

IBM also reported quarterly and annual earnings on Wednesday, beating analysts’ expectations while reporting the highest annual revenue growth rate in a decade.  Analysts expected the company to deliver $16.4 billion in fourth quarter earnings, but IBM beat expectations, with revenues of $16.69 billion.  

During Wednesday evening’s conference call, Kavanaugh noted that Red Hat - which was acquired by IBM in a blockbuster deal in 2017 - was a key contributor to the company’s revenue growth in the fourth quarter growing at 15%. “ 

IBM's cash flow was $9.3 billion in 2022, below its target of $10 billion, due to higher-than-expected working capital needs. It’s software and consulting business growth slowed down sequentially in the fourth quarter, but cloud spending was a bright spot, with deal signings doubling in 2022 for setting up services with partners such as Amazon's cloud division, Amazon Web Services (AWS) and Microsoft's cloud unit, Azure, the company said. Further, its hybrid cloud revenue rose 2% in the quarter ended December 31, 2022. 

Notably, IBM outperformed other technology companies. But, despite a “solid growth” in various segments as noted by the company, IBM believes layoffs are unavoidable. Going by the market trends, the US technology giants have been downsizing in recent months in order to cut costs and to better cope with the global economic downturn.   

Despite a “solid growth” in various segments as noted by the company, IBM believes layoffs are unavoidable. Going by the market trends, the US technology giants have been downsizing in recent months in order to cut costs and to better cope with the global economic downturn.  

In January this year, e-commerce major Amazon announced it would cut about 18,000 positions. Soon after, Salesforce axed 10% of its workforce, about 8,000 employees. Software major Microsoft said it will cut about 10,000 jobs, almost 5% of its workforce. Alphabet, parent of search engine giant Google most recently said about 12,000 workers that’s about 6% of its workforce, would be let go. Music streaming service Spotify also cut 6% of its global workforce and Coinbase, the cryptocurrency trading platform also slashed nearly 20% of its workforce, or about 950 jobs, in a second round of layoffs in less than a year. 

In 2022, about half of Twitter's staff of 7,500 was let go after it was acquired by the billionaire CEO of Tesla, Elon Musk in October 27. In December, Meta, the parent company of Facebook laid off 11,000 people, about 13% of its workforce. 

Layoffs at Google’s parent company, Alphabet, Microsoft, Amazon and IBM combined have eliminated nearly 44,000 positions in January this year. According to a report published by consulting firm Challenger, Gray & Christmas on January 5, 2023, the tech sector announced 97,171 job cuts in 2022, up 649% from the roughly 13,000 eliminated in 2021.