The recurring pattern of recent employee layoffs among tech giants suggests that these companies are hedging against economic uncertainties.
Despite the current economic conditions, many tech giants are still prone to layoffs even if they are making profits. These layoffs have been described as a slowdown in operational growth and seen as a hedge against economic uncertainties.
In the United States, Europe and Asia, tech giants such as Microsoft (NASDAQ: MSFT), Amazon (NASDAQ: AMZN), and SAP have begun mass layoffs. Financial services company Jefferies weighs in on the layoff trend, Saying,
“The reduction in headcount is a result of over-hiring during the pandemic and a slower growth outlook than originally forecast.”
Noting also that higher interest rates have affected consumer spending, Jefferies noted that “[tech giants] There is a need to reduce headcount to achieve operational efficiency with headcount matching current demand trends.
The jump in interest rates also makes capital more expensive and lowers headcount costs for companies, including startups. Looking at this development another way, a report by Bank of America Global Research states that “especially for startups, the increase in employment was partly fueled by cheaper capital”.
Global tech giants who have resorted to downsizing to stay competitive
For the final quarter of 2022, Microsoft reported a net profit of $16.4 billion, representing a decline of 8% year-on-year. The consumer software company’s results were highly benefited by its cloud business, which grew 27% YoY to $27.1 billion. Company CEO in Microsoft’s annual report Satya Nadella noted:
“We reported $198 billion in revenue and $83 billion in operating income. And Microsoft Cloud surpassed $100 billion in annual revenue for the first time.
However, Microsoft’s dazzling Q4 2022 outing hasn’t stopped the Washington-based company from layoffs earlier this year. In January, Microsoft announced it was laying off 10,000 employees to prepare for slower revenue growth.
E-commerce giant Amazon also announced layoffs of more than 18,000 workers in January. The sobering announcement came as the company beat analyst estimates for its Q4 2022 results. Like Microsoft, Amazon chalks up its downsizing to recessionary pressures and declining consumer spending.
Germany’s SAP announced it was cutting 3,000 jobs in January despite meeting its guidance for the full year 2022. Meanwhile, Singaporean tech company CGroup let go of nearly 500 full-time and contractual employees despite posting its first quarterly profit since its inception. Elsewhere in Asia, Indonesia’s GoTo Group has cut many jobs despite relative profitability.
In February, the leading semiconductor company Ditch (NYSE: DELL) announced layoffs of 5% of its workforce. The announcement came as the company reported record revenue of $102.3 billion for the 2023 fiscal year.
Dell’s operating income at that time was also $5.77 billion (24%).
apple formula
Unlike most leading tech players, Apple (NASDAQ: AAPL) has largely avoided layoffs. However, the iPhone maker has also been bracing for more stringent economic parameters by slowing hiring. In March, Apple reportedly delayed bonuses for some employees after the company experienced unfavorable production conditions in China.
Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to strip crypto stories down to the basics so that anyone anywhere can understand without a lot of background knowledge. When he is not delving deep into crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.
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