US IBM Also Lays Off 3,900 Employees... Big Tech Layoff Domino Effect

James Cavano CFO "1.5% Staff Reduction"

[Asia Economy Reporter Haeyoung Kwon] US-based IBM is laying off 3,900 employees. As global economic uncertainties increase, a domino effect of layoffs among big tech companies has continued since the beginning of the year.

James Kavanaugh, IBM Chief Financial Officer (CFO), stated in an interview with Bloomberg on the 25th (local time) that "1.5% of the total workforce will be reduced." This means laying off 3,900 employees out of IBM's total workforce of 260,000.

CFO Kavanaugh explained, "This round of layoffs will mainly focus on the remaining workforce after the earlier spinoff of Kyndryl and the sale of Watson Health," adding that "it will cost $300 million."

[Image source=Reuters Yonhap News]

IBM announced its earnings on the same day, reporting that its fourth-quarter earnings per share (EPS) last year increased by 7.5% year-over-year to $3.60. This was in line with market expectations. Quarterly revenue was $16.7 billion, slightly exceeding market forecasts and similar to last year’s figures. CFO Kavanaugh forecasted that $10.5 billion in cash flow will be generated this year, with revenue expected to grow in the mid-single digits.

After announcing the large-scale layoff plan, CFO Kavanaugh said, "We will continue to hire in high-growth business areas."

With a recession expected this year, the US big tech market has been experiencing a wave of large-scale layoffs since the beginning of the year, following last year. It is estimated that the number of employees laid off by big tech companies such as Microsoft (MS) and Amazon has exceeded 60,000. Earlier, MS announced it would lay off 11,000 employees, which is 5% of its total workforce, while Amazon, the world’s largest e-commerce company, recently announced plans to cut 18,000 employees, and Meta Platforms announced a reduction of 11,000 employees.

The outlook for the big tech market remains bleak. Although these companies enjoyed a boom due to the spread of non-face-to-face digital transformation after the COVID-19 pandemic, the realization of worsening earnings forecasts is expected to continue the wave of layoffs. On top of that, the strengthening of big tech regulations worldwide, including in the US and the European Union (EU), further darkens the outlook for big tech companies.