Add IBM to the ranks of US tech behemoths cutting jobs.
The company will give nearly 4,000 people the big blues in the near future, CFO James Kavanaugh indicated on Wednesday, when IBM said it expects to top analyst forecasts for revenue and free cash flow in 2023.
CEO Arvind Krishna called IBM’s Q4 results “solid.” The company, like Microsoft, Google and Facebook, is excited about cloud and AI. Hybrid cloud revenue rose 17% in constant currency terms last quarter, while overall revenue was flat at $16.7 billion on a GAAP basis. Stripping out the currency impact, sales grew 6%. The Street was looking for $16.4 billion on the top line.
For 2023, IBM expects full-year sales growth in the mid-single digits which, you’re reminded, counts as a good outcome in this context. If the company meets that target, 2023 would mark a third consecutive year of higher overall sales, no small feat for this stagnant dinosaur. Q4 EPS of $3.60 counted as a marginal beat. Software sales were easily ahead of consensus.
Kavanaugh attributed IBM’s 2022 revenue growth to “the strength and multiplier effect of our platform-centric approach to hybrid cloud and AI.” That’s a lot of buzzwords packed into one sentence.
The job cuts are apparently related to legacy workers from spinoffs. IBM will continue to hire in “higher-growth areas,” according to Kavanaugh. The company will take a $300 million charge on the layoffs.
Tesla, meanwhile, said it’s accelerating a “cost reduction roadmap.” Admittedly, I’m exhausted with Elon Musk and everything to do with him. Like Donald Trump during his presidency, Musk seems to make “news” every few hours, most of the time on purpose, and the rest of the time because of something he did on purpose to make news previously. The latter is the case this week. Musk is, of course, on trial for the most infamous tweet in a long career of dubious social media escapades.
Tesla’s deck was chock-full of superlatives — it was “another record-breaking quarter” and “another record-breaking” year, and so on. Q4 revenue topped estimates at $24.32 billion, and EPS of $1.19 was a few pennies ahead of expectations. Automotive margins came up short, though — 250bps short, in fact.
Obviously, the shares remain down dramatically from the highs despite a bounce this month. Musk generally tries to avoid admitting that his Twitter acquisition and penchant for trafficking in cringeworthy right-wing memes on the money-losing platform he now owns, was related to Tesla’s plunge. It’s not possible to mathematically prove a connection, but it’s a bit of a “me or your lyin’ eyes” sort of deal.
Fortunately for Musk (and shellshocked shareholders), the stock has recovered some of its losses, and is on the way to a stellar January, up more than 17%. Q4 deliveries were short of estimates, even as the company delivered a record 405,278 cars. Questions around demand plagued the shares late last year. In addition to consternation related to Musk’s Twitter exploits, reports that the company intended to cut production at its Shanghai facility raised eyebrows, as did news that Tesla dangled discounts to US buyers. Earlier this month, Tesla cut prices by as much as 20%, raising fresh concerns about margins.
On Wednesday, Tesla said it’s “planning to grow production as quickly as possible,” consistent with its 50% CAGR target. The company wants to deliver 1.8 million cars this year and said it has “sufficient liquidity” to fund its product roadmap, which includes the comical Cybertuck (“on track to begin production later this year”) and a “next generation” platform that Tesla described only as “under development” while teasing an unveil at investor day in March.
Musk has repeatedly warned of a US recession, and recently suggested the Fed should stop hiking rates, which is exactly what you’d say if your wealth was tied up in the shares of a company which benefits in market environments characterized by free money. Just ask Cathie Wood who, by the way, is having a very good month.
“We know there are questions about the near-term impact of an uncertain macroeconomic environment, and in particular, with rising interest rates,” Tesla said Wednesday, adding that “the team is used to challenges, given the culture required to get the company to where it is today.”
TSLA 1.8MM 2023 unit guidance is about 37%, not 50%, and is pretty short of consensus 1.9MM.
Add LRCX to the RIFers, a 7% cut announced, big guid miss, sees semicap industry down in 2023.
Not to mention, Teslas are not really attractive cars.
I want to see a cybertuck
One has to wonder what he is doing on a site bashing a company doing 24B of revenues per Quarter, growing 40% an year. Siggh.
Why are my comments being deleted?
Your comments aren’t being “deleted.” The way the system works is that you have to have at least one comment approved before your subsequent comments are automatically posted. That’s a bot-deterrent.
The first comment you ever tried to post on the site (earlier this month) was an announcement that you didn’t intend to renew your subscription because you were displeased with my coverage of Elon Musk. Specifically, you said that there was “No mention anywhere of energy, batteries [or] real factories pumping out revenue more than any other carmaker.” Instead, you noted, I was discussing “Twitter, Covid [and] politics” which, in your judgement, meant that I was “all over the place.”
Here’s the thing, though: This site is avowedly about politics as well as macroeconomics and markets. It says so right there in the “About Us” page, and you’d also know it from the fact that virtually every other article includes references to politics both domestic and foreign, and from the fact that one of the main menu items at the top of the page says “Politics.”
In other words: Part of this site is dedicated to political coverage. Elon Musk is now in the habit of opining on politics (both domestic and foreign) via Twitter, a company he recently bought (on the off chance you didn’t notice). As such, there’s nothing “all over the place” about my coverage of Musk. Rather, it’s Musk who, in my opinion, is “all over the place.” I’m not the only one who thinks so.
The reason your original comment (the first one you ever tried to post) never made it to the comments section was because it didn’t add anything to the discussion, in my judgement. Because that comment was never posted, your subsequent comments weren’t automatically cleared (because, as noted above, you have to have one comment manually approved before subsequent comments will post automatically). There’s no conspiracy here, it’s the way the system works. That should clear up your overarching question(s) about comments.
As to your apparent affinity for Tesla, I wish you the best in that regard. Sincerely I do. But, you should be apprised that as long as Musk continues to make controversial political statements on Twitter, he’s going to invite criticism of those statements. It’s not anyone else’s fault that he’s become a political commentator. Nobody is forcing him to tweet about Ukraine, for example, or about Dr. Fauci. He’s doing that of his own accord. Maybe, instead, anytime he thinks about tweeting cartoon memes, he should tweet about “energy, batteries [or] real factories pumping out revenue more than any other carmaker,” as you put it.
When Musk puts himself out there like that (on a political limb) as the CEO of a publicly traded company, he should expect pushback. And I’m sure he does. Musk is more than Tesla. He’s now a political personality of sorts, and the owner of a social media platform.
So, that’s how I will continue to cover him in these pages. If you don’t like that, then you know where the door is. In fact, as you indicated in your would-be inaugural comment, you already walked through it.
I think that about covers it. But be sure to let me know if I missed anything.
The main reason I read what is posted on this site, and the comments of those who also read what is here is that this site isn’t Facebook, or some other silly place people go to see pictures of other peoples’ food or some such. This is a space where smart people, many with professional experience in the topics at hand write for other smart people to read, and in my case learn things that even my long personal experience didn’t teach me. My initial doctoral education in Finance came before there was a NASDAQ, a public options market (all this business was conducted between market makers), personal computers, electronic calculators, spreadsheets and other fun stuff. There were no easily accessible data bases, no Internet (imagine). Without access to H’s stable of top market interpreters and his synthesis of their views, I would not be able to deal with today’s investment environment in any useful way. My handle says it all, I was lucky I could ride the 40 year bond bull like a rocket which gave me the ability to live as I wish today. Luck won’t cut it any longer so I need what I see here to process today’s reality. Still lucky to have this site.