Per various media reports, International Business Machines Corporation IBM is likely to retrench about 9,000 jobs this year in the United States to reduce operating costs. A significant part of these jobs is slated to be shifted to India under a “resource action” plan – an ongoing corporate strategy to tap the huge talent pool of the subcontinent at lower operating costs. Although the company spokesperson has refused to comment on the grapevines and commit an exact figure for the layoffs, various sources have confirmed that the action has already been started.

Certain job cuts have been confirmed in Raleigh, NC, New York City, NY, Dallas, TX, and CA, impacting employees from consulting, corporate social responsibility, cloud infrastructure, sales and internal systems teams. The Cloud Classic division of IBM is likely to be the strongest hit, with the company aiming to create and/or expand roles in India for professionals with expertise in cloud computing, infrastructure, sales and consulting.

IBM Rides on Hybrid Cloud, watsonx Platform

Despite the cacophony, IBM is witnessing solid demand trends for hybrid cloud and artificial intelligence (AI) solutions with a client-focused portfolio and broad-based growth. The company’s growth is expected to be driven primarily by analytics, cloud computing and security in the long haul. With a surge in traditional cloud-native workloads and associated applications, along with a rise in generative AI deployment, there is a radical expansion in the number of cloud workloads that enterprises are currently managing. This has resulted in heterogeneous, dynamic and complex infrastructure strategies, which has led firms to undertake a cloud-agnostic and interoperable approach to highly secure multi-cloud management. This, in turn, has led to healthy demand for IBM hybrid cloud solutions, resulting in an uptrend in revenues in recent years.

IBM’s watsonx platform is likely to be the core technology platform for its AI capabilities. watsonx delivers the value of foundational models to the enterprise, enabling them to be more productive. This enterprise-ready AI and data platform comprises three products to help organizations accelerate and scale AI: the watsonx.ai studio for new foundation models, generative AI and machine learning, the watsonx.data fit-for-purpose data store built on an open lake house architecture and the watsonx.governance toolkit to help enable AI workflows to be built with responsibility and transparency.

Will IBM Stock Benefit From This Restructuring?

IBM aims to benefit from the increasing propensity of business enterprises to undertake a cloud-agnostic and interoperable approach to secure multi-cloud management with a diligent focus on hybrid cloud and AI solutions. A better business mix, along with improvements in operating leverage through productivity gains and increased investments in growth opportunities, will likely drive its profitability.

The corporate restructuring efforts seems to be the call of the hour as, despite solid hybrid cloud and AI traction, IBM faces stiff competition from Amazon Web Services and Microsoft Azure. Increasing pricing pressure is eroding margins, and profitability has trended down over the years, barring occasional spikes. With a broader shift in the company’s global workforce strategy to low-cost operating countries like India, IBM is likely to improve its margins in the future.

Zacks Rank & Other Stocks to Consider

IBM currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Arista Networks, Inc. ANET, carrying a Zacks Rank #2, is likely to benefit from strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experiences. Arista delivered an earnings surprise of 12.9%, on average, in the trailing four quarters. It is well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations. 

Ubiquiti Inc. UI, sporting a Zacks Rank #1, offers a comprehensive portfolio of networking products and solutions for service providers and enterprises. Its service-provider product platforms offer carrier-class network infrastructure for fixed wireless broadband, wireless backhaul systems and routing, while enterprise product platforms provide wireless local area network infrastructure, video surveillance products and machine-to-machine communication components. In the trailing four quarters, it delivered an earnings surprise of 7.5%.

InterDigital, Inc. IDCC sports a Zacks Rank of 1 at present. It has a long-term growth expectation of 15%. IDCC is a pioneer in advanced mobile technologies enabling wireless communications and capabilities. The company designs and develops a whole range of advanced technology solutions for use in digital cellular as well as wireless 3G, 4G, and IEEE 802-related products and networks.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

International Business Machines Corporation (IBM) : Free Stock Analysis Report

InterDigital, Inc. (IDCC) : Free Stock Analysis Report

Arista Networks, Inc. (ANET) : Free Stock Analysis Report

Ubiquiti Inc. (UI) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research