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IBM to cut 'thousands' of jobs amid COVID-19 crisis

IBM is reportedly cutting thousands for the first time under its new CEO Arvind Krishna. Yahoo Finance's Ines Ferre shares the details on The First Trade.

Video transcript

BRIAN SOZZI: Let's take a look at one of the companies we're watching on YahooFinance.com. IBM is the latest company to reportedly make cuts, job cuts, amid the pandemic. Yahoo Finance's Ines Ferre is back with the details. Ines.

INES FERRE: And, Brian, I reached out to IBM to get the scope of these job cuts and where they are across the company. I haven't heard back yet. "Wall Street Journal" saying that this could, though, affect several thousand employees across different states. And in a statement, IBM said, "IBM's work in a highly competitive marketplace requires flexibility to constantly remix high-value skills, and our workforce decisions are made in the long-term interests of our business."

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Now it is worth noting that this would be the first major job reduction under the new CEO Arvind Krishna who took over that position back in April. It comes on the backdrop, of course, of COVID-19 and its impact on the economy.

And IBM's shares, though, in the last 10 years-- let me show you a 10-year chart-- hasn't moved much over the last 10 years. It had declining revenue for years, and last year it closed on that Red Hat acquisition to focus more on hybrid cloud and the AI space. And now, of course, these headwinds of COVID-19. I do want to add also back in April the company withdrew its full-year guidance because of the uncertainty surrounding COVID-19, Brian.

BRIAN SOZZI: No, Ines, you're right to point out that IBM chart. IBM has been a long-term value destroyer, at least over the past 10 years.

But, Alexis, I guess no surprise here. I mean, this is a company that big, bloated corporate beast. New CEO come in there, and if they can't grow revenue, why not try to boost your bottom line by laying people off?

ALEXIS CHRISTOFOROUS: Yeah, that is probably the the least creative way to have costs cut. I guess this should come as no surprise because both in Q4 of 2019 and then Q1 of this year on their earnings calls IBM said it would take additional structural actions, which I guess that is just fancy talk for layoffs. That would lead to cost savings.

IBM, though, is trying to retrain its workforce, reskill as Ines was alluding to. And also, I think it really comes down to the race for the cloud you know, and how is IBM going to become sort of this leaner, meaner machine when it comes to having to go up against Google and Microsoft and other companies when it comes to the cloud? because they are still distant in that race.

BRIAN SOZZI: You know, it is pretty amazing, Ines. We've seen companies like an IBM, old tech, struggle, but look at the FAANG stocks. They've been on fire the past couple of months.

INES FERRE: Completely. The FAANG stops-- the FAANG stocks have been outperforming over the last couple of months.

I do want to mention that just yesterday HP Enterprise announced some cost-cutting measures, but those are salary cuts, also a hiring freeze. So there are, of course, measures for these companies to cut costs. And as you mentioned, Brian, cutting jobs would be a way-- one way to do that.

BRIAN SOZZI: All right, let's leave it there. Good stuff. Thanks so much, Ines.