The Big Tech Layoffs Malaise Reveals A Deeper Truth
After the dust seemingly having settled on the job cuts that kicked off the year, on March 14th, Meta Platforms Inc (NASDAQ: META) revealed it will be laying off 10,000 more workers after already having laid off 11,000 workers back in November which together makes a workforce reduction of 25% from the company’s peak only half a year ago.CEO Mark Zuckerberg previously told analysts that the company is cutting on projects that are not rising to expectations or are no longer crucial to its vision while reducing middle management workforce to be able to speed up its decision making in what he pinned will be a year of efficiency.
Restructuring Efforts Allow A Quiet Shut Down Of Ventures That Haven’t Justified Expectations
The truth of the matter is that broad restructuring will allow Zuckerberg to quietly abandon his misguided efforts to sell virtual reality headsets to employers. Still, the company continues to spend billions of dollars to make the meta universe a reality through virtual reality and augmented reality technologies as the in-charge Reality Labs division lost about $13.7 billion last year on $2.16 billion of revenue.
It Seems Musk Was The One Who Started The Trend
Besides its EV mark, it seems Elon Musk was also one of the first to have started the tech layoffs wave when he slaughtered Twitter’s staff last year when he acquired the social media platform by reducing the workforce of 7,500 employees to about 2,000, with reportedly an additional 10% of employees cuts last month. The fact that he succeeded to keep the platform somewhat running, Musk has somehow been able to keep the social media platform running has surely inspired other CEOs to revaluate their ability to do more with less which in this case would be a skeletonized workforce.
Apple Seemingly Closer To Boarding The Layoffs Train
Apple Inc. (NASDAQ: AAPL) was a rare player to avoid the wave of big layoffs but it also did not participate in the pandemic-fueled hiring binge. However, it ended up joining the cost cut bandwagon on March 15th as it revealed it will be easing on bonuses and hiring, triggering fears of layoffs are on the horizon. Therefore, an argument can be made that Apple has been able to avoid layoffs mostly because it was more measured in its hiring and spending during the pandemic, with even CEO Tim Cook taking a pay cut himself.
A Herd Mentality
It’s no secret that Silicon Valley enterprises hire together as a pack, and they fire together as one as well. In January, Amazon.com Inc (NASDAQ: AMZN) announced a new round of layoffs across several divisions, impacting 18,000 employees. Twilio Inc (NYSE: TWLO), Dell Technologies Inc (NYSE: DELL), Zoom Video Communications Inc (NASDAQ: ZM) and eBay Inc (NASDAQ: EBAY) also joined with significant workforce reductions with Alphabet Inc’s (NASDAQ: GOOG) Google laying off 12,000 workers, Microsoft Corporation (NASDAQ: MSFT) 10,000 employees and Salesforce Inc (NYSE: CRM) making a cut of 7,000 jobs. A former PayPal Holdings Inc executive (NASDAQ: PYPL) Keith Rabois was not the only one to criticize these companies for being overstaffed and unproductive.
The Silicon Valley Is Taking A Page From The Automotive Industry's Book
Unlike the automotive industry where electrification is simply making some jobs go extinct, tech executives are blaming over-hiring and fake work such as attending meetings for their need to thin the ranks. But then a question is raised is this the effect of a downturn or simply that a time has come to work smarter and get leaner. This scenario undoubtedly reflects the one the automotive industry and the global restructuring that General Motors (NYSE: GM) underwent in 2019 when it cut tens of thousands of jobs and closed factories across states. On the other hand, GM, Ford Motor (NYSE: F) are now in great need for employees with software skills as unlike internal combustion engine vehicles, EVs are more about software than hardware.
Layoffs Reveal A Deeper Truth
The intense tech hiring boom trend has now transformed to a trend of mass layoffs. Although on the surface, this is about cost control, this is also a signal of a deeper shift as until now, Big Tech used to make its own rules, but now it needs to revaluate its success metrics to keep Wall Street happy. One clear example is Salesforce whose CEO Marc Benioff was able to defy calls to grow the company’s profitability alongside revenue for years but activist investors have forced him to focus more on profit margins and reduce the company’s workforce as a consequence.
The Effect Of An Economic Downturn
For now, it seems junior positions are still in demand while middle management is the one takin ga hit. But thiscooler hiring market has also given way to salary normalization as CIO dive reported that data suggests tech worker pay is still growing, but more modestly compared to recent years. The long-term effects on the IT talent are still to be seen but it is clear that tech firms are resorting to more traditional metrics of success, showing that at the end of the day, it’s all about making Wall Street happy.
DISCLAIMER: This content is for informational purposes only. It is not intended as investing advice.
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