Tech industry reversal intensifies with new rounds of layoffs – Crypto News

BY DANA MATTIOLI | UPDATED JAN 08, 2023 05:30 AM EST

Companies that grew rapidly during the pandemic are now reducing spending and staffing, sometimes repeatedly.

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

After a bruising 2022 in which companies from small startups to tech giants slammed the brakes on expansion, some of the biggest names in the sector are demonstrating that an era of austerity is only beginning, with expenses closely scrutinized and moonshot projects abandoned. Amazon.com Inc. and Salesforce Inc. both announced plans for layoffs in the past week.

The job cuts at amazon, the largest in the tech sector to date, affected more than 18,000 workers, mostly in the retail, recruiting and devices businesses. Devices is an area of ​​scrutiny under Chief Executive Andy Jassy.

“I really do believe in the devices business,” Mr. Jassy said. “But at the same time, there’s a number of experiments that we were running in that area that we just looked at it and didn’t believe were going to move the needle and be big enough to justify the cost,” he told The Wall Street Journal last month.

For years, the tech sector was among the most aggressive to expand. Companies compete for talent by offering lucrative pay packages and throwing big money at new endeavors. As Covid-19 set in, the rush to hire went into overdrive as technology companies Tried to cash in on supercharged demand.

But over the past months, several tech companies have shifted from hiring one moment to slashing thousands of positions the next as the business climate deteriorated because of accelerating inflation, Russia’s invasion of Ukraine and other factors. The experience has been humbling for some of America’s best-known corporate executives.

At Salesforce, which said it would cut 10% of its staff, Co-CEO Marc Benioff said he took responsibility for hiring too many employees as revenue surged earlier in the pandemic. The executive mea culpa for overhiring has become a refrain among tech leaders in recent months, uttered also by meta Platforms Inc. boss Mark Zuckerberg, Twitter Inc. co-founder and onetime CEO Jack Dorsey, and others.

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

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

“On some emotional level, I think we all knew the music was going to stop,” Mr. Kelman said. “I think a lot of CEOs at tech companies felt uncomfortable, at least in part, with what was going on, even though we kept pushing our chips out to the middle of the table.”

Mr. Kelman, who led Redfin into areas such as home-flipping during the pandemic, shut down business lines as the economic situation worsened and interest rates soared.

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

Video-technology company Vimeo Inc., which last week let go of 11% of its staff in a second round of layoffs, said it made the move to maintain a focus on profitability. “We also have a better understanding of where postpandemic demand is settling,” said CEO Anjali Sud in a public memo.

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

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

In November, more startup employees left their companies through layoffs than by choice for the first time since April 2020, according to data compiled by Carta, which provides software for managing employee and shareholder stock. Many of those laid off are finding new jobs quickly, and unemployment across the US remains at a low level.

The reshaping over the past year is perhaps the most pronounced course reversal for tech since the end of the last downturn, which laid the groundwork for the long boom. From the end of 2008 to November 2021, the rise of large tech companies helped sustain a more than 10-fold increase in the tech-heavy Nasdaq Composite Index. That growth ended last year, when the index fell 33%, its worst year since 2008.

The pandemic extended the prolonged upturn. Tech hiring surged as people stuck at home adopted all kinds of new digital goods and services. Existing business lines had few constraints on their license to grow, and new business ideas were quickly greenlighted.

Some 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 conditions had soured unfolded over months, not weeks.

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

“We are serving multitrillion-dollar markets, but market size 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, the venture-capital firm Sequoia Capital told companies in its portfolio to quickly cut expenses and preserve cash, calling the downturn a “crucible moment.”

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

DocuSign was one of the pandemic’s biggest beneficiaries, but Mr. Thygesen’s predecessor resigned in June following a sudden plunge in its stock price. Soon after accepting the job, Mr. Thygesen gave his approval for DocuSign to cut 9% of its workforce before its start date in October.

Others in the tech industry, such as Alphabet Inc.’s Google, have yet to cut as deeply as their peers. Alphabet surprised investors in its third-quarter earnings report in October when it said total head count had grown by almost 12,800 during the three-month period, the biggest increase on record.

Google workers began pressing executives on the possibility of layoffs. At a companywide meeting in December, the CEO Sundar Pichai said he could not make any forward-looking commitments. Google has tried to “rationalize where we can so that we are set up to better weather the storm regardless of what’s ahead,” he added.

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

When demand started to wane, the company pivoted. In the spring and summer, it began cutting some businesses. Mr. Jassy undertook a monthslong review of Amazon’s costs, the Journal reported. In mid-November, Amazon announced it would be undertaking layoffs.

“It became more apparent to us that we should be slimmer on cost,” Mr. Jassy said. “When you know that you want to eliminate some roles, there’s that pit in your stomach, because it’s people with lives, families, hopes and responsibilities. You just try to find every way you can’t do it 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.”