Why Amazon, Google and Microsoft Laid Off Thousands Of Tech Workers

big tech companies like meta Google and Amazon have been laying off a staggering amount of workers tens of thousands of people Microsoft and Google within just a couple days of each other within 48 Hours of each other both announcing they're laying off 12 000 people in Microsoft's case 10 000 people in Google's case and I think we aren't giving these layoffs as much due as they actually deserve right now folks are saying oh well that's just in the tech sector it's a white collar layoff it doesn't really matter as much but the reality is these are still hundreds of thousands of jobs there wasn't really one area of focus we're seeing getting cut it's kind of across the board and at all levels so what do the widespread Tech layoffs mean for the larger economy and those persistent recession forecasts the first of the layoffs really started with meta which laid off about 10 000 employees and this came after their earnings last year when they said look we're spending so much money on the metaverse we're losing you know up to 13 or 14 billion dollars on this project and investors hated that metastock fell more than 70 and lost more than 700 billion dollars in valuation before meta decided to lay off 11 000 workers the stock tipped higher after the announcement uh they get the message from the street loud and clear we uh we aren't clear about what metaverse our return on investment would look like having said that if you can control costs in metaverse I think that would be a positive the next big Tech thing to lay off people off was Amazon up to 18 000 employees are getting fired starting this year it was announced last year again same story over hiring and over expanding during the pandemic and now these companies feel the need to cut costs we've certainly seen a Slowdown in the advertising business over the last six to nine months and so this is clearly the response to that to try and preserve those margin pressures these Tech giants that are laying off employees essentially Tech conglomerates and so Tech layoffs across the board look like scary numbers but if they are in parts of their businesses that are structurally weaker are perhaps in Decline that is less concerning than if we have job cuts and say the higher growth areas of the business and in someone like Microsoft's case that would be an area like azure the big reason why or the Common Thread between all of these big tech companies for their layoffs is they grew too quickly during the pandemic there was this glut of spending on Tech products when the pandemic first hit and people were stuck at home and businesses had to find ways to make help their employees work from home so that means buying a lot of computers buying a lot of I.T Services Zoom subscriptions you name it that all caused a lot of money to be injected into the tech industry and some people in the tech industry some Executives got a little overconfident thinking this growth is going to be sustained forever let's hire now and get ready for that growth but they over projected it and now we're seeing an economic slowdown and everything's coming home to roost now that we're seeing these companies refocus on their core missions and focus on what they believe is going to be the next wave of tech Computing specifically artificial intelligence meta CEO Mark Zuckerberg conceded the same point in the company's layoff letter to employees this was ultimately my call and it was it was you know one of the hardest calls that I've I've had to make in in the 18 years of running the company largely what's happening in Tech is that they are right sizing after the covid surge in demand and so that demand surge was off Trend they hired to accommodate those surges and so they hired well above their organic Trend and growth rates in many cases Not only was there The increased need we'll call it for infrastructure expansion and those sorts of things but also you had just such a rush of customers you needed sales people you need customer support other levels of operating costs essentially but in other cases there are businesses where through time they've been very sort of on cost conscious so they've been investing for growth of all costs and for that reason have fairly weak profitability relative to where investors perceive they should be if things do get worse you'll try to see more consolidation the big guys are gonna be okay Google is going to be okay Apple's not going out of business anytime soon no matter how bad the economy gets but what you do want to look for is some of the more weaker companies those growth companies that either had no profits or were barely profitable those could either go out of business or become really attractive acquisition targets for one of the bigger guys in this environment

Channel: CNBC

Views: 423,428

Keywords: CNBC, CNBC original, business, business news, finance, financial news, money, money management, layoffs, working, workforce, Amazon, Google, tech, technology, tech layoffs, job layoffs, workers, losing jobs, economy, Microsoft, tech sector, industries, tech industries

Id: ANLV6RXO0kU

Length: 4min 52sec (292 seconds)

Published: Fri Feb 17 2023