A recurring pattern of recent employee layoffs among tech giants reveals that these companies are shielding themselves from economic uncertainties.
Despite the current economic conditions, several tech giants are likely to embark on company layoffs even though they are making a profit. These layoffs were attributed to a slowdown in operating growth and were seen as a hedge against economic uncertainties.
In the United States, Europe and Asia, tech giants including Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN) and SAP have embarked on mass layoffs. Financial services company Jefferies weighed in on the layoff trend, saying:
“The headcount reduction is the result of overhiring during the pandemic and a slower-than-originally anticipated growth outlook.”
Also noting that high interest rates have affected consumer spending, Jefferies added that “[tech giants] need to downsize to regain operational efficiency with a workforce that matches current demand trends.”
Rising interest rates also make capital more expensive and cause businesses, including start-ups, to cut staff costs. Looking at this development another way, a Bank of America Global Research report stated that “particularly for startups, the increase in employment was driven in part by cheap capital.”
Global tech giants that have resorted to layoffs to stay competitive
For the last quarter of 2022, Microsoft reported net profit of $16.4 billion, representing an 8% year-over-year decrease. The consumer software company’s results benefited greatly from its cloud business, up 27% year-over-year to $27.1 billion. In Microsoft’s annual report, the company’s CEO, 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 brilliant fourth-quarter 2022 exit didn’t stop the Washington-based company from cutting staff earlier this year. In January, Microsoft announced it would lay off 10,000 employees to prepare for slower revenue growth.
The e-commerce giant Amazon also announced the layoff of more than 18,000 workers in January. This grim announcement came despite the company beating analyst estimates for its fourth-quarter 2022 results. Like Microsoft, Amazon attributed its decline to recessionary pressures and a reduction in consumer spending. .
Germany’s SAP announced it would cut 3,000 jobs in January despite meeting its broad guidance for the full year 2022. Meanwhile, Singaporean technology company Sea Group laid off roughly 500 full-time and contract employees despite posting its first quarterly profit since its inception. Elsewhere in Asia, Indonesia’s GoTo Group has also shed many jobs despite relative profitability.
In February, leading semiconductor company Dell (NYSE: DELL) announced a layoff of 5% of its staff. This announcement came despite the company reporting record revenue collection of $102.3 billion for fiscal 2023.
Dell’s operating income was also $5.77 billion (24%) at the time.
The apple formula
Unlike most major tech players, Apple (NASDAQ: AAPL) has refrained from mass layoffs. However, the iPhone maker is also preparing for leaner economics by hiring at a slower pace. Apple also reportedly delayed some employee bonuses in March as the company experienced production bottlenecks in China.
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Tolu is a Lagos-based blockchain and cryptocurrency enthusiast. He likes to demystify the crypto stories down to the basics so that anyone anywhere can understand them without too much prior knowledge. When he’s not up to his neck in crypto-stories, Tolu likes music, loves to sing, and is an avid movie buff.
