On March 13th, it was reported by insiders that IBM announced layoffs to its employees in the marketing and communication departments on Tuesday.

Employees in the affected departments learned of their potential job loss during a roughly 7-minute meeting held by IBM's Chief Communications Officer, Jonathan Adashek.

Is another wave of layoffs coming?

AI replacing employees?

IBM's layoffs this time had early signs.

In the past few days, there were rumors that IBM was undergoing a global staff adjustment with a reduction target of up to 80%, dubbed the "Resource Action," to address the company's restructuring and financial pressures. The hardest-hit region is Europe, with one-third of the layoffs in Slovakia and another part in Hungary, involving positions such as CIO, procurement, marketing, communications, and human resources, which are basically related to the aforementioned affected departments.

IBM, which prides itself on its "humanity halo," has asked employees to "voluntarily resign" during the layoffs.

What is "voluntary layoff"? It refers to employees who have the intention to leave and can proactively apply, leaving behind those who do not want to leave.

Is IBM watching its employees engage in "internal struggles"?

After the "Resource Action," IBM expects to save $3 billion in annual operating costs by the end of 2024.

What a drama of "leaving the father and keeping the son" in layoffs.

And all this seems to be AI's "fault."

IBM stated that the layoffs are aimed at significantly enhancing all employees' skills in artificial intelligence.

In May last year, IBM said that it expects about 7,800 jobs to be replaced by artificial intelligence over the next five years. Therefore, the company's recruitment for back-office functions such as human resources will be suspended or slowed down. Previously, IBM had also cut 3,900 jobs.

Missing the opportunity for cloud transformation

According to IBM's disclosed fourth-quarter and full-year financial report for 2023, revenue for the fourth quarter was $17.381 billion, an increase of 4% year-on-year, and net profit from continuing operations was $3.285 billion, an increase of 14% year-on-year.

Among them, the revenue of hybrid cloud platforms and solutions grew by 2% and 8% respectively in the software and infrastructure businesses.

Looking ahead to 2024, IBM's free cash flow is expected to reach approximately $12 billion.

With sufficient funds, IBM's use of layoffs to catch up with the cloud vendors' main force may be one of the "most convenient" ways.

IBM said in early February that it would continue to advance its hybrid cloud and artificial intelligence strategy.

Cloud transformation has been a "knot" in IBM's heart for many years.

Years ago, IBM was a major player in the cloud computing field, with revenues reaching $10 billion, and it launched the "Blue Cloud" strategy.

However, IBM lacked some determination in cloud transformation and was a "close-enough" kind of company. "Blue Cloud" did not rise to the market level, and IBM missed the best opportunity to enter the public cloud market, allowing others to take advantage of the situation.

The "pie" of the public cloud market has formed a situation where AWS dominates, while cloud giants such as Azure and Google are also fighting fiercely. IBM, arriving late, prepared to enter the cloud market through hybrid clouds, using hardware as the core to penetrate into cloud computing.

With the decline in performance, this path began to falter, and the money spent on cloud computing also directly affected the overall situation.

To "regain ground," IBM embarked on an "acquisition journey."

In the early years, IBM first acquired Cleversafe for over $1.3 billion to accelerate its hybrid cloud business; later, it acquired Linux giant Red Hat, which had a market value of $20.5 billion, for $34 billion. Red Hat will operate independently as part of IBM's hybrid cloud team.

James Kavanaugh, IBM's Senior Vice President and Chief Financial Officer, said that in the past year, IBM has completed nine acquisitions to enhance its hybrid cloud and AI capabilities.

These include its $2.33 billion acquisition of Software AG's cloud computing and artificial intelligence assets, which is a significant investment.

So, how will IBM, which is focused on the trillion-dollar hybrid cloud market, catch up with the cloud giants next?

Closing Thoughts

Recently, IBM announced the availability of the open-source Mistral AI model on WatsonX.

Betting big on cloud computing and AI. Will IBM, which once claimed to be "the world's largest cloud business," make a comeback?