Amazon, Meta, Alphabet and Microsoft reveal hefty price tag as they rein in spending.
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Big Tech groups disclose $10 billion in charges from job culls and cost cuts
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This is the stock market stealing from employees. The people that make up a company need to be compensated with a bigger proportion of the wealth that company generates.
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In a rational market, having to fire tens of thousands of employees would be a sign of a failing company. This profit comes from those wages.
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I get how laying off folks cost money, but how does abandoning real estate cost the company? Maybe if you have to pay to move furniture and stuff out of the building, but how "pulling back on opening new grocery stores" costs is lost to me. I'm sure I'm missing something so please inform me.
Thanks,
Brian
Thanks,
Brian
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“Big Tech has been spending money like '80s rock stars for the last four to five years,” he said. “It feels like there’s adults in the room now.”
If $10B in cuts resulted in $800B in market capitalization, there might be adults in the boardroom of the tech companies, but not in Wall Street.
If $10B in cuts resulted in $800B in market capitalization, there might be adults in the boardroom of the tech companies, but not in Wall Street.
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Somehow this sounds like criticism:
"Apple remains the only large tech company that has not announced any job cuts or a cost-cutting program, despite on Thursday reporting its first decline in quarterly revenues in three and a half years."
...where I consider it commendable. IIRC, part of the reason is that they didn't go wild with hiring over the past few years, but that's better IMO than going on an employee binge/purge cycle.
"Apple remains the only large tech company that has not announced any job cuts or a cost-cutting program, despite on Thursday reporting its first decline in quarterly revenues in three and a half years."
...where I consider it commendable. IIRC, part of the reason is that they didn't go wild with hiring over the past few years, but that's better IMO than going on an employee binge/purge cycle.
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ColdWetDog
Ars Legatus Legionis
In Amazon's case, they seem to have abandoned the concept of going back to brick and mortar stores - actually more like studs and servers for Amazon. That likely involves breaking leases or outright selling of property at a loss.
And Amazon, of course, tarted up those buildings with a hell of a lot of technical infrastructure. That and all the back end stuff needed to support it apparently costs a bunch. Which, of course, made it difficult to actually turn a profit on the idea.
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Commercial leases you’re generally stuck paying, even if you move out. If you want to stop paying, you need to work something out with the landlord, which will generally cost something.
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Long term leases can be a real pain in the ass to get out of. If you don't negotiate something, then you're just paying the landlord for space you're no longer using. It's like, if someone wrecks your car, you still have to make the payments, until your insurance figures out what to do.
Most companies have gotten out of the business of owning office space and prefer to lease it, because office space/commercial RE really isn't their business.
To me, that seems silly, but then again, no one's asked me to run a company with more than ten people, so I might be talking out of my hind end.
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In a previous article, it was mentioned that Apple doesn't do indescrimenant hires and only does targeted hiring as needed. so Apple likely doesn't have a "bloated" workforce as Google and others do when they had to hire additional staff to handle the rapid expansion of their services that people were suddenly and unexpectedly snapping up to do WFH.
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This really speaks to the broken incentives for the C-suite at major companies. If the company is profitable, they technically don't need to cut costs, and they also don't need to raise money so it shouldn't matter what their stock-price-of-the-day is. Except that they can be sued for not working to maximize the stock price. It's so shortsighted.
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Captain Trips
Smack-Fu Master, in training
And what we are seeing now with all of these large tech / Silicon Valley layoffs is most likely why Apple didn't go on a "drunken sailor" hiring binge.
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How much are these layoffs expected to save? While the breakdown in terms of cost per layoff is helpful to understand the downsides, a proper analysis would require us to determine the expected cost of these employees over the coming years. Here is my back of the envelope math, I wish a publication like Financial Times would do this for me.
If we assume an expected cost of $500k/year/employee (note: this is the total cost of employees, not just their pay, but also the benefits, equipment, working space, etc., and is probably low for some parts of Silicon Valley) x 50k employees = $25 billion/year savings. If we project these savings over a 10 year horizon with a 10% return on savings, we get a 16x multiple, resulting a net present value of laying these individuals off of $400 billion.
If we assume an expected cost of $500k/year/employee (note: this is the total cost of employees, not just their pay, but also the benefits, equipment, working space, etc., and is probably low for some parts of Silicon Valley) x 50k employees = $25 billion/year savings. If we project these savings over a 10 year horizon with a 10% return on savings, we get a 16x multiple, resulting a net present value of laying these individuals off of $400 billion.
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Funny, they never mention excessive stock buybacks or dividends.
Wonder how much is the layoffs actually due to a flailing business (Facebook's Metaverse), vs. squeezing workers, vs. getting rid of business that is successful, but not sexy enough, which screws over existing customers.
Wonder how much is the layoffs actually due to a flailing business (Facebook's Metaverse), vs. squeezing workers, vs. getting rid of business that is successful, but not sexy enough, which screws over existing customers.
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If you pay somebody in stocks, what would be his priority?
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So, you are assuming that all of the lay off employees produced exactly $0 value for the company.
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It is all interconnected, at least in the sense that they are public companies.
Don't get me wrong, I agree with the comment above about the incentives being completely out of line, a large portion of the valuation of those companies is in how the profits go to investors (instead of employees).
In a sane world, stock buybacks and dividends would reduce a company's shackles to the investor class, instead if simply pumps up the stock prices (which obviously given CEO compensation packages, they're incentivized to do). In a sane world, the employees would get a lot more of the profit a company generates than we see today.
But noting all of that, and being in this 'at risk' category of working in the tech space, there is some extent of the macro here being a reaction to over-hiring in the pandemic. Total employee counts are still up significantly over the last few years and it's probable that this is indeed necessary as these companies pivot into things like AI.
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It'd be worth noting that Apple also doesn't have all that much in the way of enterprise services currently; as such, they'd have had less incentive to hire in anticipation of a more permanent WFH shift, as they wouldn't have been one of the companies providing that to begin with, unlike e.g. MS or Google.
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This is huge - CEOs and other senior leadership at many (I'd intuitively say most, but I haven't actually checked) corporations have their compensation tied directly to the share price. Incentivizing them to maximize the share value is the intent, not a side effect. And that makes sense - most shareholders are not invested for dividends, they're expecting to benefit from the value of their shares going up so that they can sell at a profit down the road.
If that's not what society wants, then the laws governing corporations will need to be changed. Possibly a change that favors dividends over stock buy-backs, for example.
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AmanoJyaku
Ars Tribunus Angusticlavius
Nothing. Despite axing 10,000 people due to "costs", Meta just announced a $40B stock buyback. That could have paid the wages of those employees for at least 10 years. Or 40 years, assuming each laid off person got paid $100K per year.
Go figure, after announcing the buyback Meta's stock price jumped.
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Yeah, that obviously plays both into the perverse incentives and aggravates the excessive executive pay situation.
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Usually two ways. 1. pay to break lease. 2. tons of costs to move things out of a place and back to the state it was in before you moved in.
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Someone on ARS noticed that it is very curious that vast majority of companies are laying off exactly 5 to 7% of the workforce. This looks more as pleasing Wall Street gods than realistic need to lay off people.
Also, it should be noted, in 2000s, lay offs have been seen in particularly good light by Wall Street. It was an easy way to boost the share price. Very disapointing that history repeats its despicable moments.
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How about firing the people off whose projections were so bad that companies are now spending billions in layoffs? My group let people go who were hired less than 6 months ago. Not one person who made those forecasts were let go.
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Can't speak for the USA, but in a lot of countries they have additional rules/regulations that kick in if you attempt to make more than a certain percentage of the workforce redundant.
If it is the same for the USA, then maybe the 5-7% is to stay just under that threshold?
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The other option is for the them to sublet the office space, but we are currently at incredibly low demand for commercial real-estate, so even if they could find someone to move in I doubt they would be getting anywhere near enough to cover what they owe on the lease.
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Stories like this are just the symptom; the information age productivity boom, combined with the increase in multiplier between entry level & CEO pay IMO represents a serious problem brewing. Concentration of wealth, gamed democracy, disenfranchised billions of people & consequent risk to everything from consumer rights & democracy to a habitable planet. 2022/3 seems like the most miserable time in my lifetime; stressed workers, stressed unemployed, for the benefit of whom; billionaires who can't crack a smile. Opportunists directing the ire of the disenfranchised at everything except the root causes. Corporations whose attitudes seem to be "if I don't get to win, I will burn it all down"
Repeated instances of mass layoffs in the face of increasing profit is a massive indication of a need for change; be it reduced hours working week; universal basic income, stronger corporate governance or simply de-linking business from politics
Repeated instances of mass layoffs in the face of increasing profit is a massive indication of a need for change; be it reduced hours working week; universal basic income, stronger corporate governance or simply de-linking business from politics
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It’s redundancy and cancelling contracts with everyone from landlords for office space to equipment suppliers for chairs and desks that are no longer needed.
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In Germany, 49% of the votes of the Board that names the CEO and supervises the company strategy are employees’ representatives. That leads to healthier HR management, less short-sighted management, and less focus on the stock value.
And no, they aren’t Commies.
And yes, investors keep investing.
And no, they aren’t Commies.
And yes, investors keep investing.
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I’m curious what the job market is looking like in tech right now. Record low unemployment overall but this is a big lump of people looking for something new. Are there smaller companies grateful to finally get tech workers who are absorbing them or is it bitey out there?
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Going out on a limb here, but it would appear that Apple is the counter-example to what this story is all about, and yet the image associated with the headline features the Apple logo prominently in its center. Not a particularly fair representation of the story's content.
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These people were working for Meta - they weren't curing cancer or walking children in nature. The fact that they are no longer working for Meta means they need to find new jobs, which is bad for them, but you appear to think that simply because Meta can afford to pay them for 10 years it should pay them for 10 years even if they aren't actually generating significant value. Not that anything anybody does at Meta generates significant value (sorry Martin if you're reading this)
Meta's purpose isn't to employ people, a cynical person would say its purpose is to exploit users to generate wealth, a less cynical observer might say it is to serve users to generate wealth. Either way Meta's ultimate purpose is to generate wealth for its owners, the clue is in it being a for profit rather than non-profit entity.
Now if Mozilla was firing people in order to raise executive salaries you'd have a genuine beef.
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AmanoJyaku
Ars Tribunus Angusticlavius
It was criticism: of the other companies. If Apple's revenues declined, yet it doesn't have to do layoffs, why do they need to do it?
They don't.
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Apple's headcount hadn't ballooned the same way over the last 2 years, so naturally enough they aren't cutting now.
https://www.globaldata.com/data-insights/technology-media-and-telecom/apples-Number-of-employees/
From 147k to 164k from 2020 to 2022
vs
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Actually, I kind of feel like this is an industry response to "the Great Resignation". I recently read an article in Computerworld of all places (https://www.computerworld.com/artic...-did-the-millions-who-quit-their-jobs-go.html), but apparently the Great Resignation continued through 2022 (and might still be going on), with a massive amount of churn, especially in the tech industry. You'd have people changing jobs multiple times in a year, with a significant pay increase at each change; employers were panicking because they were continuously short on staff, and were offering crazy salaries (and other tactics*)to steal people away from other companies. It was a continuous cycle leading to rapid pay increase, but only if you left your current job (employers were slow on updating the salaries of existing employees).
And because, at any given time, you either had a chunk of the workforce not working, or working at diminished capacity as they were either ramping up in a new position or were "quiet quitting" while interviewing for the new job (or, in some cases, poorly working 3 jobs simultaneously from home, without their employers' knowledge), there was always a scramble for more employees.
So, jump to today - with 250,000 dumped on the "looking for work" pile nearly simultaneously; it almost seems like an additional motivation is to put out the "Resignation" fire.
Although, considering the shockingly high cost of the layoffs (I mean, I never got more than 6 weeks severance from a layoff) and if they issued the severance in a single chunk without any sort of term attached, then they can also start collecting unemployment immediately. So some of these people may not start looking for another job for a year or more.
Probably just the big guys trying t keep it from looking too blatant.
*I actually had a company from just up the road park a billboard truck in our parking lot advertising hiring (both companies are microelectronics/semiconductor related).
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AmanoJyaku
Ars Tribunus Angusticlavius
@Cloudgazer
Try reading the posts I responded to to understand my responses. You're not wrong, but you keeping missing the point.
Try reading the posts I responded to to understand my responses. You're not wrong, but you keeping missing the point.
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Your last point is incorrect, that’s a myth that’s propagated so that people think “hate the game, not the player” and give a pass to horrible corporate behavior. It’s called the myth of shareholder supremacy. I have also heard it perpetuated by people throughout levels of companies as basically a way to wash their hands of their contributions to the company’s misdeeds.
There is no legal obligation. They’re just all greedy fucks.
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