Now the big question is, will these steps be enough?
The answer will become clear in the coming months, but tech companies are trying to remedy the problem by downsizing some of their recent additions and cutting back on long-form projects.
The layoffs announced by tech giants in recent months have been massive compared to last year, when they were still on a hiring spree that accelerated during the pandemic.
For example, Google parent Alphabet Inc said on Friday it would cut 12,000 jobs — about the same number it added in the third quarter of last year, the most recent data it has reported. In the first nine months of 2022, Alphabet added more than 30,000 jobs.
Similarly, Microsoft, which added 40,000 employees in its fiscal year through June, said last week it was cutting a quarter of that number. Facebook parent Meta Platforms Inc said in November that it would cut 11,000 of its workforce after adding more than 15,000 in the first three quarters of 2022.
“We are allocating both our capital and talent to areas of secular growth and long-term competitiveness for the company,” Microsoft CEO Satya Nadella said in a note to employees on Wednesday.
It looks like America’s top tech companies are following their playbook from past economic downturns and are looking to cut, delay or terminate projects. Specifically, the industry is cutting back on areas that are not yet viable businesses and focusing on those that can generate revenue.
As a result, companies are rethinking their moonshots and other unprofitable distractions, fueled by billions of dollars in search of the next big thing.
“It’s time you cleaned house,” said Michael Metzger, a partner at Drake Starr, a global investment bank focused on the technology, media and communications sectors. This is very unfortunate for those affected, but almost natural and somewhat healthy for the industry as a whole.”
Unity Software Inc., maker of the tool used by videogame developers, said last week that it was shuttering its sports and live-entertainment division as the team behind it worked on an initiative that would bring the company closer The results for the period were not expected. ,
“In the current economy, this is not a good time to be in the market,” said John Ricciello, Unity’s CEO. “We’ll put it in the closet and bring it back another day.”
Last year, Snap Inc. discontinued development of its Pixi Flying selfie camera less than four months after launching the product. At The Wall Street Journal’s Tech Live conference in October, company CEO Evan Spiegel said Snap needed to focus on advertising to make more revenue per user and expand the audience for its core social-media product.
“That kind of focus means making tough decisions like discontinuing a product we really love,” he added.
Upon announcing the layoffs at Alphabet on Friday, CEO Sundar Pichai said in a blog post that the company conducted a rigorous review of all product areas and functions to ensure that its workforce is aligned with its top priorities. “The roles we are eliminating reflect the results of that review,” he wrote.
Some Wall Street analysts and executives say the reduction in industry size is long overdue because tech companies have hired too aggressively in recent years and invested too much in bold bets.
“It’s time they managed to cut back and work on profitability from their core businesses,” said Laura Martin, analyst at Needham & Company. “They should align their cost structures with their slowing revenue growth and closing of ancillary businesses.”
Many tech company leaders have admitted that they have gone ahead with hiring over the past few years. Several people apologized and took responsibility for the layoffs.
Photos: Tech layoffs across industry: Amazon, Salesforce and more cut staff
When Meta Platforms said it would cut 11,000 employees, or 13% of its workforce, CEO Mark Zuckerberg told employees that he believed the rapid shift online after the onset of COVID-19 would be permanent. “I got it wrong, and I take responsibility for it,” he said.
Some tech companies have had to make multiple rounds of layoffs, or increase planned cuts after determining they haven’t gone far enough. Real-estate company Redfin Corp laid off 13% of its workforce in November and closed its home-flipping unit. It did this after reducing its workforce in June. Similarly, Amazon.com Inc. said earlier this month that it was laying off 18,000 employees after planning to lay off 10,000 people in November.
Analysts say that in some cases, layoffs linked to economic strife may serve as an opportunity for employers to weed out poor performers. However, it is difficult to know where to draw the line. At some point, the economy is bound to improve, and companies that cut too far may find themselves at a loss.
“You want the innovation engine to have the bandwidth to keep churning,” said Rohit Kulkarni, analyst at MKM Partners.