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Only in the month of January, at least six large companies in the technology sector have made cuts in their workforce. The executive directors of many of them have argued that the dismissals respond to a preventive action in the face of the bleak economic outlook that is coming this year. Apple has been the only one of the ‘big tech’ that has not joined the wave of dismissals, as the date of publication of financial results for the fourth quarter of 2022 approaches.
They are preparing for a worse economic scenario. The news that has occupied the international media in the financial field is that of the cuts of the big technology companies.
As a percentage of the global workforce, Meta from Facebook, Instagram and WhatsApp laid off 13% of their employees; Salesforce, 10% of their own; Google’s Alphabet, at 6% and Spotify, at 6%; Microsoft, 5% of its employees; IBM announced 3,900 layoffs on January 25 (1.5%) and Amazon laid off 1% of its employees worldwide.
“All these companies talk about three basic conditions: the first is inflation and how this has affected the demand for many of their services, both at the end-consumer level and at the corporate level. The second is that they are all waiting for us to see at least a small recession in the main developed economies of the world where they produce most of their income”, said in an interview with France 24, Samir Estefan, CEO of TECHcetera and Digital Transformation Consultant.
The decision to cut a percentage of its workers came in January, but it responds to measures taken at least two years ago, when the directors of companies in the technology sector increased their profit projections, increased their investments in projects and fell in a wave of massive hiring to meet these objectives.
Two years later, the fallout from a war, widespread high inflation and rumors of a global recession result in a sudden decline in business optimism and create a precautionary scenario for the coming years.
The employees, the most affected?
Faced with a negative economic outlook, technology companies have resorted to cuts in their workforce as one of the main measures to cushion blows to their finances.
Amazon employees in Coventry, central England, went on strike this week demanding a pay increase. The event was enshrined as the first day in British history that employees of this company carried out a work stoppage, arguing that the company has huge profits, its tax payments are low and its employees’ salaries are not fair in the face of inflation.
With recent job cuts, many in cyberspace are wondering: why cut jobs and not investment or product prices?
“Increasing prices in an environment in which there is an increase in inflation is not going to be good because they all compete with Chinese companies that can maintain their prices (…) And it is that in a company the bulk of its expenses are personal. In research and development, many have invested several billion as Meta’s bet on the ‘Metaverse’ but it is their turn to stop it. In general, many have to play today vs. the future,” explained Estefan.
Still more companies could join the ‘boom’ of layoffs, in an effort to make the difficult decisions, before the publication of the earnings results of the last quarter of 2022, a move that shields their shares from plummeting on the stock market.
