IBM's cash flow in 2022 was $9.3 billion, less than its forecast of $10 billion, due to higher-than-expected working capital requirements.
Digital Desk: On Wednesday, IBM became the latest technology company to lay off 3,900 workers. According to the tech hub, the layoff drive was part of several asset divestment.
The corporation has failed its yearly cash target, putting a damper on hopes of exceeding revenue estimates in the fourth quarter.
Chief Financial Officer James Kavanaugh told Reuters that the corporation was still "dedicated to hiring for client-facing research and development".
The layoffs, which are related to the separation of IBM's Kyndryl business and a portion of AI unit Watson Health, would result in a $300 million charge in the January-March period, according to IBM.
In extended trade, the company's shares sank 2%, wiping out earlier gains on mainly positive results. Analysts believe the dip was caused by reports of job layoffs and a shortfall in free cash flow.
"It appears that the market is disappointed by the scale of the announced job losses, which amounted to barely 1.5% of the staff," said Jesse Cohen, senior analyst at Investing.com.
"Investors expected deeper cost-cutting efforts."
From Big Tech to Wall Street financial titans, US corporations have been aggressively downsizing and cutting expenses to better deal with the global economic crisis.
IBM's cash flow in 2022 was $9.3 billion, less than its forecast of $10 billion, due to higher-than-expected working capital requirements.
In addition, the company expects yearly revenue growth in the mid-single digits in constant currency terms, down from the 12% recorded last year, as pandemic-driven demand for digitising enterprises has given way to cautious expenditure by clients amid mounting recession fears.
IBM reported slowness in new bookings in Western Europe in October, while partner Accenture Plc reported weakness in its consultancy sector. Cognizant Technology Solutions Corp lowered its 2022 projection in November owing to contract cancellations.
The fourth-quarter growth of IBM's software and consulting businesses decreased sequentially, but cloud expenditure was a bright spot, with deal signings doubling in 2022 for setting up services with partners such as Amazon.com's AWS and Microsoft's Azure.
Its hybrid cloud sales increased by 2% in the fiscal quarter ending December 31.
According to Refinitiv, total revenue remained steady at $16.69 billion in the period, compared to analysts' projections of $16.40 billion.
IBM reported 5.5% revenue growth in 2022, the strongest in a decade.
