After their relentless global expansion over the past decades and the lurch towards all things digital during the pandemic, ill winds are to be blowing through the corridors of the world’s biggest tech companies.
The locked-down version of society we endured during the pandemic lead to an explosion in demand for all things digital. As we venture back out into the “real world” the gold rush of digitisation has been replaced by a growing sense of unease in the tech sector and a scythe being taken to tens of thousands of roles.
The stories of turbulence in the tech sector are relentless. Amazon has recently announced over 18,000 job cuts, Apple lost a trillion dollars in value, Tesla’s woes continue alongside Elon Musk’s Twitter distractions and more than 150,000 jobs have gone from the sector. What is happening in the tech sector? Note – Is the Apple figure correct as it does not align with the total of 150000?
Overextension. The tech sector saw an explosion in demand during the pandemic and also as the pent-up demand from that period filtered into the real economy. With rising interest rates, and the wave of demand having passed, demand is softening across the global economy. Let’s look at the performance of some of the tech giants that have made swinging cuts in the latest year:
Amazon
Having originally planned to shed 10,000 jobs, CEO Andy Jassy confirmed recently that the number of roles being lost would be closer to 18,000. That represents the largest job cuts in Amazon’s history. But, it must be taken in context; Amazon has added 743,000 more people to their payroll since 2019.
The bulk of the cuts is said to be coming from its consumer retail divisions such as Amazon Fresh and HR. Projects such as Echo (also known as Alexa) and delivery robots are thought to be on the chopping block. Andy Jassy cited uncertain economic times after a period of rapid expansion to cope with pandemic levels of home-based shopping. This appears to have waned as consumers return to the shops and also have less to spend as inflation-driven, cost of living increases bite.
Plimsoll's latest assessment of Amazon Inc. reflects the sheer scale of the company and its seemingly endless growth of sales, profit and value. However, our model of analysis also adds credence to the boards’ strategy of trimming areas of the business that remain unprofitable. After years of rapid expansion, a quick New Year diet is probably in order.
Salesforce
The CRM behemoth also recently announced its own round of job losses with 8,000 employees, or 10% of its workforce facing ‘the chop’. Marc Benioff, Chief Executive, explained how the company had overexpanded and in a note to employees said, “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”.
Plimsoll’s latest assessment of Salesforce Inc., shows a company generating a very stable sales per employee figure of around US$360,000. This is despite a doubling in staff numbers. It would appear the increasing indebtedness of Salesforce Inc may be a bigger issue than its growing staff numbers!
Meta
Mark Zuckerberg perfectly encapsulated the exuberance of the tech sector during the pandemic and the belief that increased online activity would endure after life got back to normal when he said, “Unfortunately, this did not play out the way I expected”.
Despite cutting 1 in 8 of his global workforce, the Meta CEO has hardened his commitment to building an immersive AI metaverse. This expensive experiment has seen US$10bn spent on R&D each quarter. When will this attempt to pivot to the next big thing in the face of competition from TikTok, deliver results?
Plimsoll’s latest analysis of Meta Platforms Inc shows a very strong business regardless of the sharp fall in share price recently and the march of alternate platforms competing for browser time and advertising dollars. If Mr Zuckerberg can pull off his AI virtual dreams, Meta is well-placed to continue connecting the world.
Shopify
The Canadian e-commerce platform recently laid off 10% of its entire workforce in the face of plummeting share prices. The company were one of the key beneficiaries of the enforced cessation of 'in-person' shopping and built a business model to reflect that. The drop in share price reflects a return to the physical retail environment and the ever-present shadow of larger, cheaper Amazon.
Plimsoll’s latest analysis of Shopify Inc shows a resilient company with a high Plimsoll Chart indicating they are well placed to weather the changing tides of consumer preference. This seems to indicate they have the resources to see their drive towards a whole commerce solution of platform, POS and fulfilment (based on its recent acquisition of several logistics companies) come to fruition.
Of course, not all tech companies are having a torrid time. Purveyors of Artificial Intelligence and ‘The Internet of Things’ continue their future march. Today’s tech giants were only relatively recently up start-ups and disruptors that swept away what went before and created new ways of living, working and socialising. With many having seen their dominance start to wane in the face of new disruptors will they learn the lessons from economic history and act quickly?
Plimsoll provides a convenient means of assessing your own position against the 10 key rivals that you compete against. With the Plimsoll Board Report, we can help companies of all sizes to take stock of where they sit at the start of the year, how they compare to those competitors around them and what they need to do next.
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