Amazon is cutting more than 18,000 jobs as it becomes the latest tech giant to lay off staff amid turbulent economic times and fragile investor confidence.
Boss Andy Jassy told employees the biggest reform in his history was needed following widespread hiring during the pandemic.
“Companies that last for a long time go through different phases. They’re not in heavy person expansion mode every year,” Jassy said. “This year’s review was more difficult given the uncertain economy and the fact that we have been hiring quickly over the past few years.”
Pillar of technology: Amazon, founded by Jeff Bezos (pictured with his girlfriend Lauren Sanchez) has joined a list of companies that say they have over-hired during the pandemic
The news sparked fears over jobs in the UK, where around 70,000 of Amazon’s 1.5 million global employees are based.
The cuts were announced just hours after workers at its Coventry warehouse set a date for Amazon’s first UK staff walkout, halting parcel delivery for the end of this month.
The GMB union said workers taking action on wages are set to make history on January 25.
But few were shocked by the cuts, affecting several teams across Europe, which have become common in Silicon Valley. 2
According to tracking site Layoffs.fyi, the tech industry laid off more than 150,000 workers in 2022, with the trend showing no signs of waning.
This week, Salesforce announced it would cut about 10% of staff, or 8,000 jobs, citing similar pandemic-induced issues as its San Francisco-based neighbors.
The software giant has joined a list of companies that say they over-hired during the pandemic and underperformed afterwards.
“As our revenues have accelerated during the pandemic, we have hired too many people leading to this economic downturn that we are currently facing, and I take responsibility for that,” chief executive Marc Benioff told staff.
So while the IMF predicts that a third of the global economy will fall into recession this year, companies will continue to push for lighter projects and even tighter budgets to weather the tough times.
Susannah Streeter, investment analyst at Hargreaves Lansdown, believes the hardest hit companies are likely to be those whose successes are more inextricably linked to advertising.
According to marketing analytics firm WARC, while ad spending is expected to increase, it will be much slower as more companies fight for less money.
Combined with the rise of China’s social media powerhouse TikTok, which has over a billion users, it’s a recipe for disaster for owners of Facebook, Meta and Snapchat.
Both have eliminated 11% and 20% of their respective squads to prepare for the tough run ahead of them.
Facebook owner Mark Zuckerberg apologized to staff in November for his decision-making, saying increased competition resulted in revenue far below expectations. “I was wrong,” he wrote.
The flip side, Streeter explained, is that this difficult period will ease, as inflation eases and interest rates peak later this year.
Until then, she said companies must undergo a “resizing process”. “During the pandemic, tech companies had to meet a hiring demand, but now they’re trying to establish a team size that’s right,” she said.
In some companies, a large number of employees have been laid off, such as on Elon Musk’s Twitter. But the layoffs are a drop in the ocean for Amazon’s military.
Apology: Facebook owner Mark Zuckerberg says increased competition led to revenue far below forecasts
Dan Ives, analyst at investment firm Wedbush, said: “These tech stalwarts need to rip the bandage off and cut headcount and costs as the first step towards right sizing their business model.”
Shares in Meta, which also owns WhatsApp and Instagram, have risen 25% since announcing that up to 600 staff could move to the UK.
Although Alphabet, the parent company of Apple and Google, appears to have survived without any layoffs, pressure is mounting – the iPhone maker slipped from the $2 trillion club this week due to production issues.
Both Amazon and Salesforce were lifted following their news, reversing their respective falls of 48% and 38% over the past year.
AJ Bell analyst Russ Mold said Amazon’s withdrawal from experiences such as brick-and-mortar stores would allow it to get back to basics with its focus on e-commerce and the cloud.
“The news was pleasing to shareholders who will appreciate any efficiencies that can increase their share of the returns generated by the business,” he said.
The feeling is one of redemption, where big tech is trying to recoup losses and reshape a direction that pleases investors — but perhaps means purging staff.
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