file. , Photo Credit: Reuters
Zoom Video Communications Inc said on Tuesday it would cut about 1,300 jobs as demand for the company’s videoconferencing services slows as the pandemic subsides, and take a related charge of up to $68 million.
Shares of the company, which fell 63% last year, closed up 9.9% on the news, led by a decline in technology stocks, but declined marginally in extended trading.
Announcing the layoffs, which will affect about 15% of its workforce, Chief Executive Officer Eric Yuan said he would take a pay cut of 98% for the coming fiscal year and give up his bonus.
He said, ‘We worked tirelessly… but we also made mistakes. It didn’t take us that long to fully analyze our teams or assess whether we were sustainably moving toward top priorities,” Mr. Yuan said.
According to a regulatory filing on Tuesday, Zoom will incur approximately $50 million to $68 million in charges related to the layoffs. A major part of this will be spent in the first quarter of FY2024, the company said.
The company, which became a household name during the lockdown due to the popularity of its video-conferencing tool, has seen its revenue growth slow.
Analysts forecast Zoom’s revenue to grow only 6.7% in fiscal 2022 after a more than four-fold increase in revenue and a nine-fold increase in profit in 2021. Profits are projected to decline by 38% in 2022.
Rishi Jaluria, analyst at RBC Capital Markets, said, “I would say incrementally, maybe this is telling us that we shouldn’t expect a near-term re-uptake on the revenue side, but we’re seeing growth in the margins of an already profitable company.” may see additional growth.” Said.
Zoom hired to meet surging demand during the pandemic, but has now joined US companies in cutting costs to brace for a possible recession.
US companies from Goldman Sachs Group Inc to Alphabet Inc have laid off thousands of people this year to address a slump in demand caused by high inflation and rising interest rates.
The video conferencing software maker also said its executive leadership team would reduce their base salaries by 20% over the same period.
Mr Yuan said the departing workers would receive 16 weeks’ pay, healthcare coverage and a bonus for the year.