As a recent report flagged further job cuts at International Business Machines Corp. IBM, short-seller Jim Chanos on Sunday slammed the company for the rumored strategic action.
What Happened: The Register said in an exclusive report in late February that IBM asked its staff to put up their hands for voluntary redundancy as it seeks to eliminate more jobs globally, with Europe and a handful of departments likely the most impacted.
About 80% of the planned reduction was targeted at the Enterprise Operations & Support and Q2C missions, Finance & Operations, the report said.
Chanos questioned the need for job cuts. “More layoffs for the no-growth $IBM, trading at almost 30x true earnings. Incredible,” he said in a post on X, formerly Twitter. He also flagged AI as a risk for the company. “AI is as much a risk to $IBM's consultant-heavy business model, as it is an opportunity,” he said.
See Also: Best Artificial Intelligence Stocks
Why It’s Important: IBM’s fourth-quarter results released in late January showed year-over-year revenue growth of 4% to $17.4 billion, with all three major segments: software, consulting, and infrastructure reporting anemic growth. The company guided to mid-single-digit revenue growth for 2024.
Speaking at the earnings call, CFO Jim Kavanaugh said IBM is laser-focused on productivity initiatives as it strives to digitally transform its business processes and scale AI within IBM. “This includes simplifying our application and infrastructure environments, streamlining our supply chain, aligning our teams by workflow, reducing our real estate footprint, and enabling a higher value-added workforce through automation and AI-driven efficiencies,” he said.
Kavanaugh expressed confidence that the company can achieve annualized cost savings of $3 billion by the end of 2024. He also said increased productivity will lead to workforce rebalancing fairly consistent with 2023.
In a May 2023 interview with Bloomberg’s CEO Arvind Krishna hinted at a hiring freeze as the company seeks to replace 7,800 jobs by AI. “These non-customer-facing roles amount to roughly 26,000 workers,” he said, adding, “I could easily see 30 percent of that getting replaced by AI and automation over a five-year period.”
IBM shares closed Friday’s session down 0.30% at $195.95, according to Benzinga Pro data.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Comments
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
