IBM and SAP are the latest tech companies to shed thousands of jobs as they reorganize businesses and profits are squeezed by a slowing global economy.
IBM announced the cuts on Wednesday, saying they were related to a previously announced spin-off and the sale of two business units. About 3,900 jobs, or 1.5% of its global workforce, are expected to be eliminated. The move will cost IBM about $300 million this quarter, a spokesman confirmed.
SAP, Europe’s biggest software company, will lay off 2.5% of its global workforce of 112,000, or about 2,800 employees, according to an earnings report published on Thursday. The restructuring will cost between €250 million ($272 million) and €300 million ($381 million); the company’s shares fell 3.3% in Frankfurt.
In a presentation streamed live to reporters, SAP CEO Christian Klein said the restructuring was “directed” and would allow the company to invest in the areas “where it really matters for SAP to be competitive in the future”, particularly its cloud business. .
The news comes as other major tech companies reduce their workforces around the world in response to the gloomy global economic outlook and waning demand for some digital services in the wake of the pandemic. Last week, Google’s parent company Alphabet and Microsoft announced layoffs of 12,000 and 10,000 employees, respectively.
This followed similar plans hatched by Amazon and Salesforce to eliminate thousands of jobs, with more than 18,000 employees affected at the e-commerce giant alone. The US tech sector, which went on a hiring spree during the pandemic, announced 97,171 job cuts in 2022, up 649% from the previous year, according to consultancy Challenger, Gray & Christmas.
An IBM spokesperson told CNN on Wednesday that the company’s cuts were entirely related to the reorganization of the two affected business units, “not an action based on 2022 performance or 2023 expectations.”
The units affected are Kyndryl, an IT infrastructure services company that was officially spun off from IBM in November, and IBM’s health analytics business, which is in the process of being acquired by an investment firm.
The New York-based company also reported mixed results on Wednesday, with slightly better-than-expected revenue but lower-than-expected operating profit and free cash flow.
IBM shares fell 2% premarket in New York.
Asked about the outlook for software demand from its enterprise customers this year, IBM CEO Arvind Krishna said most of the company’s customers seemed confident it would “emerge stronger”.
“We’re seeing them double” despite “different headwinds in 2023,” he told analysts on a conference call.
Krishna also noted that while other tech companies may have reported more pessimistic forecasts recently, “the reason we remain in this optimistic frame of mind [é] that we have no business with the consumer”.
“So I think as a result we may be seeing a slightly different subset of the economy than those who may have a large direct exposure to a consumer business,” he added.
SAP reported a 7% year-on-year decline in operating profit in 2022 as it ended operations in Russia and Belarus and collected less revenue from software licenses. He said increased investment in research and development, sales and marketing also impacted performance.
Source: CNN Brasil
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