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IBM Corp and SAP SE have joined the list of global technology companies that are slashing thousands of jobs as their profits come under pressure from a slowing global economy.
American tech giant IBM delivered an upbeat annual sales forecast on Wednesday while announcing that it would eliminate about 1.5 per cent of its global workforce. The reductions will amount to a “ballpark” figure of 3,900, Chief Financial Officer James Kavanaugh said in an interview. The cuts will focus on workers remaining after spinning off the Kyndryl and Watson Health units and will cost the company about $300 million, he said. IBM still expects to hire in the “higher-growth areas,” Kavanaugh said.
IBM’s current headcount is 260,000, Kavanaugh said. That is about 22,000 lower than the figure disclosed for December 2021.
SAP, meanwhile, said it planned to cut 3,000 jobs, or 2.5 per cent of its global workforce, and explore the sale of its remaining stake in Qualtrics, as the Germany software company looks to cut costs and focus on its cloud business. SAP Chief Executive Officer Christian Klein said the job cuts were a strategic move and “not related to our business momentum.”
Dow Inc is also planning to cut about 2,000 jobs as the chemical maker seeks $1 billion in savings and confronts a flareup in energy costs that followed Russia’s invasion of Ukraine. The company said it will shut down certain operations, “particularly in Europe” in response to the challenges.
EY said it planned to cut jobs and eliminate costs in Germany after its failure to detect suspected fraud at Wirecard AG, the electronic payments company that collapsed in 2020, shook confidence in the auditor.
The management board of EY Germany has decided to make “various structural changes subject to co-determination,” the company said in response to questions from Bloomberg. The Financial Times reported earlier that EY Germany plans to cut 40 partners and fire 380 staff to improve profitability.
In its forecast, IBM said 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 $9.18 billion of free cash flow and annual sales growth of 1.2 per cent, according to data compiled by Bloomberg.
IBM Chief Executive Officer Arvind Krishna has been trying to pivot Big Blue from its traditional business of infrastructure and information-technology services to the fast-growing cloud-computing market. The company’s revenue increased in 2022 for the second consecutive year after almost a decade of no growth or slipping sales.
Fourth-quarter revenue was unchanged at $16.7 billion, the Armonk, New York-based company said in a statement. Analysts, on average, estimated $16.4 billion. Earnings, excluding some items, were $3.60 a share in the period ended December 31, while analysts projected $3.58 a share.
The outlook “signals steady demand for its consulting and software products,” Anurag Rana, an analyst at Bloomberg Intelligence, said in a note after the results. “Another key metric that stood out to us was the free cash-flow outlook of $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.”
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