Amazon, Salesforce, and Vimeo Kick Off 2023 With Major Layoffs
As both Amazon and Salesforce CEOs admitted, the rate of hiring in past few years was greater than it should have been.
2023 kicked off on a sobering note for thousands of tech workers as three major tech companies confirmed fresh layoffs. On Wednesday, Amazon, Salesforce and Vimeo announced they would lay off 1.2%, 10% and 11% of their respective workforces. All three companies laid off some employees last year.
The culprit? Well, no one particularly.
An unprecedented COVID-19 pandemic transpired into global lockdown measures enforced to contain the spread of the contagion, which stalled the global economy like no other event in recent years.
The tech sector seemed relatively immune to the crash given a record number of users/employees and companies resorted to the web for entertainment, work, communication, etc. As the initial shock of the novel coronavirus subsided, new products and services flooded the market, helping users keep their jobs and manage affairs virtually.
Meanwhile, all seemed rosy as economists expected a V-shaped recovery, i.e., a rapid bounce to pre-pandemic levels and higher. The global economy seemed on track to register a V-shaped recovery which naturally entails higher spending.
As it turns out, the recovery has been K-shaped, revealing glaring fault lines in the global economic system. In a K-shaped recovery, some parts of the economy perform healthily while others stagnate or even decline. Technology was one of the sectors that, in early 2021, was on the upper arm of the ‘K.’
To cater to the rising demand for tech services, companies chewed off more than they could bite. In 2021, the U.S. tech industry hiring spree included the onboarding of more than ~87,000 people and companies were expected to add 177,705 people in 2022, according to CompTIA.
As both Amazon CEO Andy Jassy and Salesforce CEO Marc Benioff admitted in respective announcements, the hiring rate was greater than it should have been. “I’ve been thinking a lot about how we came to this moment,” wrote Benioff. “As our revenue accelerated through the pandemic, we hired too many people leading into this economic downturn we’re now facing, and I take responsibility for that.”
In 2022, 1018 tech companies laid off 153,678 employees, according to Layoffs.fyi. Crunchbase data indicates 91,000 U.S.-based tech workers lost their jobs last year.
See More: From the Great Resignation to the Great Layoff: What Ails the Tech Industry?
Fresh Amazon layoffs
Almost six weeks after Amazon started parting ways with ~10,000 employees, on Wednesday, the company revised the number of employees set to get the ax to 18,000. This is 1.2% of the world’s largest retailer’s 1.5 million-strong global workforce.
Between 2019 and December 2021, Amazon doubled its workforce owing to the expansion of facilities and operations. In contrast, the company’s revenue for Q1 and Q2 2022 declined before increasing in Q3 2022 to $127.1 billion. However, it still declined year-over-year and is lower than its Q4 2022 revenue of $137.41 billion. Consistent operating expenses also mean lowering profitability. In the nine months ended September 2022, Amazon’s net loss stood at $3 billion.
Consequently, the Seattle-based company instituted a hiring freeze for corporate roles in the retail business. Amazon also halted warehouse expansion plans, shut down brick-and-mortar stores and some other experimental or loss-making divisions, and undertook other measures.
Most of the 18,000 workers to be handed pink slips will be from Amazon Stores and People, Experience, and Technology or PXT organizations.
“These changes will help us pursue our long-term opportunities with a stronger cost structure; however, I’m also optimistic that we’ll be inventive, resourceful, and scrappy in this time when we’re not hiring expansively and eliminating some roles,” Jassy wrote.
Layoffs of Amazon’s 18,000 employees are bigger than Meta’s 11,000 or Intel’s ~8,000, announced in Q3 2022. Amazon recently secured an $8 billion loan for general corporate purposes.
Amazon’s market capitalization declined by ~48% YoY from $1.69 trillion in January 2022 to $868.57 billion today.
Salesforce Layoffs
Days before Amazon said it would offload a part of its workforce in November last year, Salesforce also confirmed it would dismiss less than 1,000 employees. However, the revised number is bad news for more than 7,000, or 10% of Salesforce’s total 79,000 employees. Salesforce’s employee count rose by 30% between 2020 and 2022.
In the nine months ended October 31, 2022, or the first three quarters of 2022, Salesforce registered a revenue of $21.23 billion, up 19.08% year-over-year (YoY). During the same period, the enterprise software provider’s operating expenses surged by a near-identical margin of 19.39% ($13.43 billion to $16.03 billion) while its net income declined 79.21% from $1.47 billion to $306 million.
“The environment remains challenging and our customers are taking a more measured approach to their purchasing decisions,” Benioss noted.
Salesforce’s plan to reduce operating costs, improve operating margins, and increase profitability will also include selling real estate assets and office space reductions. The company expects $1.4 billion to $2.1 billion in charges associated with employee exits (employee transition, severance payments, employee benefits, and share-based compensation) and exit charges pertaining to office space reductions.
Impacted employees living in the U.S. will receive a minimum of nearly five months of pay, health insurance, career resources, and other benefits, while similar benefits are announced for its international employees.
During its Q3 2022 earning call in late November 2022, Salesforce failed to provide forward-looking guidance, citing it is “not possible to forecast future gains and losses.” The company’s market capitalization declined by 44.23% YoY from $250.32 billion in January 2022 to $139.59 billion today and 53.59% from it’s all-time high of $300.2 billion in November 2021.
See More: Tech Hiring: Is the Tech Job Boom Fizzling Out Amidst Layoffs?
Vimeo layoffs
Like Amazon and Salesforce, Vimeo also laid off some of its workforce (6%) in July 2022. And like Amazon and Salesforce, it wasn’t enough.
Vimeo CEO Anjali Sud on Wednesday penned a letter to employees (also posted online) calling for “cost discipline” for the company in an “uncertain economic environment.” Sud said 11% of Vimeo’s ~1,200 employees would be relieved of their services.
“Several things have changed since we reduced our workforce by 6% in July. We have seen a further deterioration in economic conditions, in the form of prolonged geopolitical conflict, rising interest rates, and global recession fears. We also have a better understanding of where post-pandemic demand is settling and how that might impact our self-serve growth in the near term,” Sud added.
Vimeo layoffs are expected to see a workforce reduction in almost every region and department though the majority of people shown the door are in Sales and R&D. The video-hosting platform’s Q1, Q2 and Q3 2022 revenue is $108.4 million, $111 million and $108.1 million with a net loss of $26.6 million, $26.5 million, and $22.82 million respectively.
Combined, Vimeo posted a revenue of $327.46 million in the first three quarters of 2022 (up 14.67% YoY) against a net loss of $76.47 million (also up by 159% YoY). The company also lost 100,000 subscribers quarter-over-quarter (from 1.7 million to 1.6 million) in Q3 2022 though its users increased to 287 million.
“We have a new executive team in place with a clear plan to focus our investments on 2 business priorities: re-accelerating self-serve, and doubling down on Vimeo Enterprise.”
Vimeo’s market cap slid 79.79% YoY to $600 million.
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