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Tech Layoffs Surge In January Even As Microsoft, Alphabet, And Meta Set Records On The Wall Street

Tech Layoffs Surge In January Even As Microsoft, Alphabet, And Meta Set Records On The Wall Street
The Nasdaq is at its highest level in two years, while the S&P 500 is trading at a record high. On Thursday, the market capitalization of Microsoft, Meta, and Alphabet shares all exceeded $3 trillion, setting new records.
But one needs to keep that from the supervisors.
Silicon Valley is being applauded by Wall Street, but tech businesses are rapidly cutting jobs. According to the website, 85 tech companies have fired about 23,670 employees so far in January. That is the highest since nearly 38,000 members of the business were told the way out in March.
With SAP announcing employment adjustments or layoffs for 8,000 employees and Microsoft slashing 1,900 roles in its games segment, activity ramped up this week. Furthermore, eBay eliminated 1,000 positions, or 9% of its full-time workers, while Brex, a highly valued finance firm, laid off 20% of its workforce. "We need to better organise our teams for speed — allowing us to be more nimble, bring like-work together, and help us make decisions more quickly," eBay CEO Jamie Iannone said to staff members in a message.
Google announced earlier this month that it had slashed several hundred jobs across the board, while Amazon had cut hundreds of workers across its Prime Video, MGM Studios, Twitch, and Audible departments.
Discord, a prominent chat service used by gamers, announced that it is laying off 17% of its employees, while Unity revealed that it is reducing approximately 25% of its employment.
The flurry of activity is in anticipation of a flurry of tech profits the following week, when Microsoft, Apple, Alphabet, Amazon, and Meta are all expected to release their quarterly results. The cost-cutting initiatives that businesses implemented last year in response to growing inflation, interest rate hikes, recession worries, and a severe market collapse in 2022 were highly praised by investors. The economy is looking up, yet the frugal behaviour persists.
When 277 technology businesses laid off over 90,000 workers in January of last year, the tech industry was forced to face the end of a bull market that had lasted more than ten years.
The first quarter of 2023 saw the majority of rightsizing efforts, and from then on, the number of cuts decreased each month until September, when they started to rise towards the end of the year.
As businesses plan for the upcoming year, one reason for the January rise could be because they've realised they can get more done with less.
According to CEO Mark Zuckerberg, 2023 was the "year of efficiency" at Meta, and 20,000 employment cutbacks were accompanied by a nearly 200% increase in the company's stock. Artificial intelligence became the industry's catchphrase when new generative AI technology demonstrated how to automate customer support, vacation booking, and campaign creation.
The hoopla surrounding artificial intelligence (AI) sparked worries about how much less human labour will be needed as technology advances. However, the workforce is feeling the effects of it more immediately. The demand for AI is so high that some IT businesses are reducing staff in order to devote more resources to creating AI solutions.
“These companies, in general, are reducing numbers of employees associated with product lines or divisions that have not been successful because they want to reposition themselves for AI,” said Art Zeile, CEO of DHI group, which owns the tech recruiting platform Dice.
Zeile stated that "it's not the kind of news that it was earlier" and quickly brought up the fact that the cuts we're seeing in January are significantly smaller than those from a year ago.
While company executives may use varied language to communicate their downsizing strategy to staff and investors, their overall goal is to sharpen their focus.
A little more than three months after Microsoft concluded its acquisition of Activision Blizzard, Phil Spencer, CEO of Microsoft Gaming, stated that his company's layoffs were a part of a bigger "execution plan" that would decrease "areas of overlap." According to SAP, the goal of the reorganisation is to put more "focus on key strategic growth areas, in particular Business AI."
In a statement headed "2024 priorities and the year ahead," Alphabet CEO Sundar Pichai informed staff members that "to create the capacity for this investment, we have to make tough choices." He added, "We have ambitious goals and will be investing in our big priorities this year." Additionally, CEO Bob Carrigan of Amazon's Audible division stated that the company must continue "getting leaner and more efficient" in order to continue operating for the "foreseeable future."
According to CNBC, several businesses are likely examining the benefits that Salesforce and Meta received following their significant cost-cutting initiatives last year, according to Nigel Vaz, CEO of the consultancy firm Publicis Sapient.
After laying off almost 10% of its employees in January 2023, Salesforce's stock nearly doubled over the course of the year, marking its highest performance since 2009. The year after Meta announced layoffs was the best for the company's stock since Facebook went public on the Nasdaq in 2012.

“I look at Meta and Salesforce as only two examples of companies that needed the impetus,” Vaz said. “The minute they got the impetus, then demonstrated what happens when you act with edge on stuff that you probably knew you needed to do.”
Not just in the IT sector are there layoffs. Citigroup, the troubled bank, announced earlier this month that it was laying off 10% of its employees. Additionally, Levi Strauss announced on Thursday that, as part of a reorganisation, it will fire at least 10% of its corporate workers worldwide. As of Thursday, CEO Bob Bakish of Paramount became the latest media corporation to announce layoffs, stating that the company must "operate as a leaner company and spend less."

Numerous tech companies, both large and small, operating in the consumer and enterprise markets, are displacing workers.
According to Tim Herbert, chief research officer at CompTIA, which monitors trends in the computer industry, there is a "intense focus" on profitability, margins, and cost-cutting at the large publicly traded corporations.
However, he continued, there is a "enormous base" of small and mid-sized digital enterprises in the United States, and in certain instances, foreign workers, contractors, and freelancers are being particularly hard hit.
Herbert, though, agreed with Zeile when he said that there isn't enough information to be overly concerned about the activity in January.
“There’s a lot of nuance to the data, so we always want to be a little bit careful not to read too much into it,” Herbert said. “We don’t want to ever get too hung up on just one month of data, or even two months of data.”

The latest macroeconomic indicators offer some cause for optimism, even though tech earnings statements next week will provide investors a better idea of the near-term prognosis for corporate and consumer spending.

According to data released by the Commerce Department on Thursday, the economy expanded more quickly than anticipated in the fourth quarter, while inflation decreased during that time.

The GDP grew at an annualised rate of 3.3% during the quarter, exceeding the 2% gain that the Wall Street consensus predicted. In the meantime, quarterly consumer price growth was 2.7% on an annual basis, down from 5.9% a year earlier. From the mid-2022 peak during the pandemic, inflation has been declining.

The Federal Reserve raised its benchmark rate eleven times in less than two years to combat inflation, and investors saw those important statistics as likely signs of rate decreases in 2024, which is why the market has been rising.

According to Vaz, there is optimism among corporate leaders on the fact that "spending is essentially coming back in so many sectors" and that "inflation actually meaningfully starting to come down."


Christopher J. Mitchell

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