Tech industry turnaround intensifies with new round of layoffs

By Dana Mattioli | Updated Jan 08, 2023 05:30 am EST

Companies that boomed during the pandemic are now slashing spending and staff, sometimes repeatedly

Tech’s revaluation is accelerating, as a new wave of layoffs signals how executives are pivoting from a growth-above-all mindset to protecting their bottom line.

After a strong 2022 in which small companies startup For tech giants to put the brakes on expansion, some of the sector’s biggest names are demonstrating that an era of austerity is beginning, with spending being scrutinized and projects being abandoned. Amazon.com Inc. and Salesforce Inc. Both announced layoff plans last week.

job cuts AmazonThe largest ever in the tech sector, affecting more than 18,000 workers, mostly in retail, recruiting and appliances businesses. The device is an area of ​​investigation under chief executive Andy Jassy.

“I really believe in the business of appliances,” Jesse said. It has to be big enough to justify the needle and the cost,” he told The Wall Street Journal last month.

For years, the tech sector was the most aggressive to expand. Companies compete for talent by offering attractive salary packages and throwing big bucks at new endeavors. As COVID-19 arrives, the hiring spree intensifies technology companies Tried to cash in on supercharged demand.

But in the past months, many tech companies have shifted from hiring one moment to slashing thousands of positions the next as the business climate worsened due to soaring inflation, Russia’s invasion of Ukraine and other factors. Is. For some of America’s best-known corporate executives, the experience has been humbling.

At Salesforce, which said it would cut 10% of its workforce, co-CEO Marc Benioff said he took responsibility for hiring many employees as revenue spiked earlier in the pandemic. The executive scapegoat for overhiring has become a refrain among tech leaders in recent months. meta Platforms Inc. Mark Zuckerberg, boss of Twitter Inc. co-founder and one-time CEO Jack Dorsey and others.

“The bull market for 2022 was in humility,” said Rich Wong, partner at venture-capital firm Accel.

Redfin Corp CEO Glenn Kelman said he has some regrets about the way the real estate technology company has handled rapid pandemic growth as housing demand surges. Redfin went on a hiring spree, only to lay off a large percentage of its workforce when the market cooled.

“On some emotional level, I think we all knew the music was going to stop,” Mr Kelman said. We kept pushing our chips to the middle of the table.”

Mr. Kelman, who led Redfin in areas such as home-flipping during the pandemic, closed business lines as economic conditions worsened and interest rates rose.

“If I could jump in a time machine and go back even 18 months, I would say that the easiest way to build a profitable company is not to come up with amazing ideas for new ways to delight the customer,” Mr. Kelman said “It’s time to stop doing stupid things.”

Video-technology company Vimeo Inc., which last week let go of 11% of its workforce in a second round of layoffs, said it took the move to focus on profitability. “We also have a better understanding of where post-pandemic demand is coming from,” CEO Anjali Sood said in a public memo.

Social-media company Snap Inc., the owner of Snapchat, last year shelved a drone project after it said it would cut 20% of its ranks.

More than 1,000 tech companies have laid off more than 150,000 employees since the beginning of last year, according to Layoffs.fyi, a website that tracks job cuts in media reports and company releases.

More startup employees left their companies through layoffs in November for the first time since April 2020, according to data compiled by Carta, which provides software for managing employee and shareholder stocks. Many of those laid off are quickly finding new jobs, and unemployment remains low across the United States.

The rehab is perhaps the most obvious course reversal in the past year for the tech since the end of the last recession, which laid the groundwork for the long bounce. From late 2008 to November 2021, the rise of big tech companies helped sustain a more than 10-fold increase in the tech-heavy Nasdaq Composite Index. That rise ended last year, when the index fell 33%, its worst year since 2008.

The pandemic prolonged the bull run. Tech hiring boomed as people stuck at home embraced all kinds of new digital goods and services. There were few constraints on their license for existing business lines to grow, and new business ideas were quickly greenlit.

Some of the tech executives involved in those decisions say they sowed the seeds of today’s pain. That recognition hasn’t come quickly. Unlike the outbreak of the pandemic, which caused boardrooms across the country to take stock and adjust plans, the realization that the pandemic had soured came in months, not weeks.

Uber Technologies Inc. CEO Dara Khosrowshahi first sounded a note of caution last spring, telling employees that the company would cut marketing spending and hiring.

“We are serving multitrillion-dollar markets, but the size of the market is irrelevant if it doesn’t translate into profit,” Mr. Khosrowshahi wrote in an email to employees. “We need to show them the money.”

Shortly thereafter, venture-capital firm Sequoia Capital called on the companies in its portfolio to cut expenses and preserve cash, calling the downturn a “crucible moment.”

“I think all the senior leaders coming out in the back half of 2022 wished they had taken action earlier,” Alan Thygesen, CEO of e-signature company DocuSign Inc., said in an interview.

DocuSign was one of the biggest beneficiaries of the pandemic, but Mr. Thygesan’s predecessor resigned in June after a sudden drop in its share price. Soon after accepting the job, Mr. Thygesan gave his approval for DocuSign to cut 9% of its workforce in October.

Others in the tech industry, such as Alphabet ink Google, yet have to cut as deep as their peers. Alphabet surprised investors in its third-quarter earnings report in October when it said it had added nearly 12,800 total employees during the three-month period, the largest increase on record.

Google employees started pressuring the executives regarding the possibility of layoffs. At a company-wide meeting in December, the CEO sundar pichai Said he could not make any forward-looking commitments. He added that Google has “tried to rationalize where we can so that we are better prepared to weather the storm, whatever lies ahead.”

Few companies have experienced the boom and recent gloom of the pandemic more acutely than Amazon. The online retail behemoth benefited from the influx of customers online shopping and businesses adopting its cloud-computing services. To meet the demand, Amazon doubled its logistics network and added hundreds of thousands of employees.

When demand began to decline, the company pivoted. In the spring and summer, it started cutting off some businesses. The Journal reported that Mr. Jesse conducted a months-long review of Amazon’s costs. In mid-November, Amazon announced it would be laying off.

“It became more and more clear to us that we needed to be slim on costs,” Mr. Jesse said. Responsibilities You just try to find every way you can’t and talk yourself out of it, but ultimately you believe it’s the right decision for the company right now so you have to do it.