Or, in other words, IBM had financial issues, lowered salaries, laid off many silently and then name-dropped a buzzword as the excuse du jour.
https://www.businessinsider.com/big-four-consultancies-deloitte-ey-cut-staff-pwc-accenture-2024-10
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Microsoft and Meta’s results yesterday verified what IBM reported last week. AI is quite expensive, and it’s very very hard to quantify any significant business results from it. With that said, what should IBM investors expect? To justify AI, someone at IBM has to get nuked. We are looking at you consulting. So what will the nuking look like? Just look at Kyndryl, and you will get your answer. Kyndryl over the last 3 years has gone from 19 billion to 16 billion (eg exiting contracts that have margins that even the body shops don’t want). In addition to exiting contracts, Kyndryl has opted for cutting 10k of their 90k headcount rather than retrain them (eg there isn’t the high value demand for AI services that management expected). Net net for consulting will be a 15-20% disengagement from contracts, with a 15%-20% reduction in headcount. That’s 24-30k worth of restructuring about to descend on Consulting. IBM will justify this by saying they are restructuring to enhance their enterprise AI investments.
So "AI" just means "computer something" now
This nets out where consulting within IBM, and AI dropped the ball. It’s not that AI isn’t working, but it is that management got ahead of their skis and AI is progressing slower than anticipated
“Apple Intelligence has landed with a whimper. Apple users and investors alike might need to be patient when it comes to appreciating the potential of artificial intelligence.
The iPhone maker’s initial AI features for its devices were officially launched Monday and didn’t set the world alight. Email summaries, some photo-editing options, and minor improvements to digital assistant Siri—it’s not the stuff of science fiction.
So why all the fanfare of a launch now, when even the tech giant itself admits more exciting features will be rolled out over the next year? The answer is largely because the market is impatient to see AI progress.
That could cause some indigestion in Big Tech earnings this week as the scale of spending on AI infrastructure is revealed. The combined capital expenditure of the largest U.S. tech companies is expected at $218 billion this year, rising to $254 billion in 2025.
It wouldn’t be a surprise if Alphabet, Amazon.com, Meta Platforms, and Microsoft are punished if they overshoot capex estimates without being able to show commensurate returns from AI investment. Meta in particular looks vulnerable with a forecast 35% rise in capex for the September quarter from the previous quarter, after a stellar run for the Facebook-parent’s stock.
However, if the Big Tech stocks take a hit, that doesn’t mean an AI bubble is popping. The progress in areas such as content recommendation and image generation is real. Text-to-video and autonomous AI agents for jobs such as customer service look to be next up. It’s just going to take a bit of time.”
What does this have to do with IBM?
Every company in IT is laying people off. It's the economy and their projections moving forward. There will be a number of difficult issues to face in January regarding the economy.