Key learning points
- Google just announced that they will lay off 12,000 people by 2023
- Many other tech companies announced layoffs in 2022, and it looks like this trend will continue through 2023
- January has already seen the second highest number of layoffs in a month since Q3 2020, with 11 days left in the month
- In particular, many tech companies were overhired during the pandemic lockdowns, as online activity around the world reached unprecedented heights
As of January 2023, according to layoffs.fyi, a total of 40,474 tech jobs have already been cut at 151 different companies. Barring November 2022, which saw 52,135 employee cuts, that’s by far the highest monthly figure we’ve seen since the start of Q3 2020.
And this doesn’t include the 12,000 that Google announced today.
The list of downsizing companies includes many small startups that are struggling, as well as some large companies that rarely send their employees out. Some companies with layoffs so far in 2023 include WeWork, Microsoft, Amazon, Stitch Fix, Salesforce, Vimeo, ByteDance, Teladoc Health, Riot Games, Hootsuite, Carvana, CoSchedule, Crypto.com, Coinbase, Thinkific, Citrix and of course, Twitter .
So yes, quite a bit.
Let’s take a look at some of the biggest names on this list and see what this trend could mean for future tech.
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Google is going to lay off 12,000 employees
Google CEO Sundar Pichai sent an email today announcing that they will begin layoffs in the US immediately. Cuts will also be made in several other countries, but will take longer due to “local laws and practices”.
Dismissed staff will receive 16 weeks of severance pay and an additional two weeks of pay for each year they have worked at the company.
As is often the case with the announcement of layoffs, Alphabet’s share price jumped on the news, rising 4%.
The announcement isn’t unexpected, as Google recently made changes to their performance review process, making it easier for employees to fall into the underperforming category and more difficult to make their way into the top-performing category.
Microsoft lays off 10,000 employees
On January 18, Satya Nadella, the CEO of Microsoft, announced that the company will reduce its workforce by a total of 10,000 employees. With a global workforce of approximately 220,000, this equates to a reduction of approximately 5% of the total workforce.
Attributing the reduction in headcount to the changing economic environment, Nadella stated, “We’re now seeing our customers optimize their digital spend to do more with less.” The company expects to pay $1.2 billion for severance payments, lease consolidation and hardware modifications.
Microsoft will release its earnings report next week, but growth is expected to be significantly lower than in previous years. Some speculate that the 5% workforce reduction may indicate additional layoffs in the year 2023.
Salesforce cuts workforce by 10%
B2B software giant Salesforce has announced plans to reduce its headcount by 10%, amounting to 8,000 employees, and reduce its office space footprint due to economic concerns.
The company’s co-CEO Marc Benioff stated in a memo to employees, “The environment continues to be challenging and our customers are taking a more measured approach to their purchasing decisions.”
As with other technology companies, Salesforce’s revenues rose dramatically during the pandemic as more people worked from home and relied heavily on technology for remote work.
In the memo, Benioff said the company may have been hiring too aggressively during that time. In October, Salesforce employed nearly 80,000 people, up from about 48,000 three years earlier.
Amazon lays off 18,000 workers
Meanwhile, thousands of Amazon employees received an email from the company on Wednesday saying their position had been “eliminated” effective immediately.
This latest round of layoffs affected approximately 18,000 employees, as previously expanded from the number of 10,000 announced by CEO Andy Jassy in November. Shortly after the emails were sent, access to work computers and offices was also revoked for many of these employees, according to Business Insider.
The emails from HR said, “Unfortunately, your role has expired. Effective immediately, you will no longer be required to perform any work on behalf of Amazon.”
Stitch Fix replaces CEO and reduces headcount by 20%
Online personal styling service Stitch Fix is going through a major upheaval, firing its CEO and slashing its workforce by 20%.
The announcement is unlikely to come as a huge surprise given the company’s recent financial results. Last year, they announced they had lost 200,000 active customers and had a net loss of $78 million. This was a significant increase from last year’s loss of $18.8 million.
Founder and Interim CEO of Stitch Fix stated in a blog post, “We will be losing many talented team members from across the company and I am truly sorry.”
Coinbase is laying off more employees as the crypto winter continues
The crypto sector has been one of the hardest hit in recent volatility, with even the most so-called blue chip companies struggling, or in the case of FTX, completely going under. Coinbase isn’t doing too badly, but they’re certainly not immune.
CEO Brian Armstrong announced on Jan. 10 that they would lay off an additional 950 employees, as part of an effort to cut operating costs by 25%.
It doesn’t come without a cost, though, as severance pay and related costs are expected to cost the company about $150 million.
The cuts come after Coinbase already laid off 18% of its workforce in June last year.
“Dark times also wipe out bad companies, as we are seeing now. But those of us who believe in crypto will continue to build great products and increase economic freedom in the world. Better days are coming, and when they come, we will be ready,” Armstrong said in his statement.
Fired from Crypto.com
Last week, another crypto heavyweight announced major cuts to their workforce, with Crypto.com releasing details of a 20% reduction in headcount.
Co-founder and CEO Kris Marszalek posted on the company’s blog: “We grew ambitiously at the start of 2022, building on our incredible momentum and in line with the trajectory of the wider industry. That trajectory changed rapidly with a confluence of negative economic developments.”
This brings the total number of employees at the crypto exchange down to about 4,000 and is the second round of cuts they have implemented. In June last year, they announced a headcount cut of about 260 and another 2,000 between July and October.
Companies such as Coinbase and Crypto.com rely heavily on trading volume to generate revenue. With volumes down significantly as crashing prices have deterred investors and traders, the outcome has taken a huge hit for many exchanges.
What do all these layoffs mean for investors?
There’s no denying that it’s been a tough time for the tech industry. In the short term, that probably won’t change much. That said, layoffs aren’t necessarily bad news when you look at it long term.
On the contrary, many of the companies mentioned in this article saw their share price rise after the announcement of layoffs. For shareholders, it often means a company is cutting the fat and focusing more on profitability.
This may mean cutting off non-performing business units and focusing spend on the marketing areas that deliver the best ROI.
Still, it is difficult to know which companies will emerge the strongest from the current volatility.
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