IBM and SAP are laying off thousands of workers
IBM and SAP are laying off thousands of workers
IBM and SAP are the latest tech companies to lay off thousands of workers as they restructure their businesses and profits suffer as the global economy slows.
IBM (IBM) announced the layoffs on Wednesday, citing the previously announced spinoff and sale of two business units. It expects to shed 3,900 jobs, or 1.5% of its global workforce. According to a spokesperson, the move will cost IBM (IBM) approximately $300 million this quarter.
According to an earnings report released Thursday, SAP (SAP), Europe’s largest software company, will lay off 2.5% of its global workforce of 112,000, or approximately 2,800 employees. The restructuring will cost between €250 million ($272 million) and €300 million ($381 million); in Frankfurt, the company’s stock was down 3.3%.
SAP CEO Christian Klein said in a live streamed presentation to reporters that the restructuring was “targeted” and would allow the company to invest in areas “where it really matters for SAP to be competitive in the future,” particularly its cloud business.
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The announcement comes as other major technology companies around the world reduce their workforces in response to the bleak global economic outlook and waning demand for some digital services in the aftermath of the pandemic. Alphabet, the parent company of Google (GOOGL), and Microsoft (MSFT) both announced layoffs of 12,000 and 10,000 employees, respectively, last week.
This followed similar plans outlined by Amazon (AMZN) and Salesforce to shed thousands of jobs, with the e-commerce giant alone affecting over 18,000 employees. According to consulting firm Challenger, Gray & Christmas, the US tech sector, which went on a hiring spree during the pandemic, announced 97,171 job cuts in 2022, a 649% increase over the previous year.
According to an IBM spokesperson, the company’s cuts were entirely related to the reorganisation of the two affected business units, and were “not based on 2022 performance or 2023 expectations.”
The affected units are Kyndryl, an IT infrastructure services business that was officially separated from IBM in November, and IBM’s healthcare analytics business, which is being acquired by an investment firm.
On Wednesday, the New York-based company reported mixed earnings, with revenue slightly higher than expected but operating profit and free cash flow lower than expected.
In New York premarket trading, IBM shares were down 2%.
When asked about the outlook for software demand from business customers this year, IBM CEO Arvind Krishna said that most of the company’s clients appeared confident that they would “emerge stronger.”
“We’re seeing them double down,” despite “different headwinds in 2023,” he said on a conference call with analysts.
While other tech companies may have issued more pessimistic forecasts recently, Krishna stated that “the reason that we are remaining in this optimistic frame of mind [is] because we have no consumer business.”
“As a result, I believe we may be seeing a slightly different subset of the economy than those who may have a significant direct exposure to a consumer business,” he added.