An apparent effort at trimming its workforce was the catalyst behind IBM (NYSE: IBM) stock's rise on the second trading day of the week. On reports that the storied tech company aims to reduce its headcount in certain divisions, investors traded the shares up by more than 3% on the day. That rate outpaced the performance of the S&P 500 index, which gained 1.1%.
Job cuts apparently coming
Citing an unnamed "person with knowledge of the matter," CNBC reported that IBM informed its marketing and communications unit employees it was making cuts in the division. This was conveyed in a brief, in-person meeting led by the company's chief communications officer, Jonathan Adashek.
This hooks into a wider trend in the tech industry, which has been downsizing recently. According to data cited in a January article by National Public Radio, in 2023, more than 260,000 positions in the industry were eliminated. Several factors were and are playing into this -- a retreat from the elevated hiring levels of the coronavirus pandemic, inflation (which is slowly abating but still a worry for many businesses), and slumping customer demand.
The quick ascent of artificial intelligence (AI) is also a factor; some companies may be cutting jobs in anticipation of AI functionalities performing the work. IBM is one of those companies -- last August, it said it aimed to replace almost 8,000 positions with AI technology.
Slimming down
IBM has not reacted to the CNBC report, but the apparent cuts in a non-tech division seem to be very much in accordance with its plans. While it's never pleasant to hear about people losing jobs, investors were likely encouraged that the company is following through with its aim of becoming a leaner operation.
Should you invest $1,000 in International Business Machines right now?
Before you buy stock in International Business Machines, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and International Business Machines wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
*Stock Advisor returns as of March 11, 2024
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends International Business Machines. The Motley Fool has a disclosure policy.
