Fears of mass layoffs stalk Silicon Valley
After years of hiring, winter is coming to the likes of Twitter, Meta and Microsoft – and the perks may have had their day too.
Free Ubers, gourmet lunches and private pods reserved for napping. “This is a day in the life of someone working in tech,” says a Gen Z worker as she shows her TikTok viewers around her office. “We also have a barista at the office, so there’s yummy coffee for everyone and a dangerous amount of snacks,” she says.
The video is just one of many to go viral for showing the lavish perks bestowed on tech workers.
Employees at companies such as Apple, LinkedIn, Microsoft and Meta have long enjoyed a raft of luxury benefits designed to retain talent. But with the threat of mass layoffs, there are now fears this cosy culture will soon come to an end.
Thousands of workers have been made redundant and many tens of thousands more are likely to follow as share prices dive at Silicon Valley’s biggest companies and they trim the fat.
“Winter is coming to the tech world and Silicon Valley is seeing layoffs across the board for the first time since 2008,” says Dan Ives, a Wall Street technology analyst at Wedbush Securities.
Last week’s financial results revealed just how deep the trouble runs in Silicon Valley. Meta’s shares fell 24pc on Thursday after a dismal set of numbers. Founder Mark Zuckerberg revealed revenues had declined 4pc, but costs jumped 19pc to $22bn (£19bn). Meta’s overall valuation is now languishing at about $265bn, having been a trillion-dollar company just months ago.
Meanwhile Amazon projected the slowest holiday-quarter growth in the company’s history. Quarterly revenues grew by 15pc compared with the same period last year to $127.1bn. Net income declined by 9pc to $2.9bn.
“We’re taking actions to tighten our belt,” Brian Olsavsky, its chief financial officer said, adding that Amazon would pause hiring in some businesses.
Google parent Alphabet said its advertising revenue grew just 6pc, which, apart from at the start of the pandemic, was its weakest revenue growth for any quarter since 2014.
Reality is starting to bite. The prospect of job cuts has plenty of Silicon Valley staff nervously awaiting their company all-hands meeting or Zoom call during which their team’s Slack channel is locked and their corporate email accounts frozen. Benefits are being cut, and hours worked are increasing. Data gathered by Layoffs.fyi estimates there have been 60,000 tech redundancies in the US so far this year.
Nowhere are fears of redundancies more pronounced than at social network Twitter. Ahead of closing his $44bn takeover of Twitter on Friday, billionaire Elon Musk was reported by The Washington Post to be considering a huge cost-cutting drive of as much as 75pc of the company’s headcount. Musk denies the claim he will cut three quarters of staff but, regardless, cost-cutting and headcount reductions are expected. The Tesla billionaire has repeatedly criticised Twitter for what he sees as long-running failures by its staff and executives to tackle problems with its social network.
Twitter has taken some action. The company announced a hiring freeze in May, closed or downsized several global offices and cancelled a 2023 company-wide retreat to Disneyland.
Staff circulated an open letter, calling Musk’s potential cuts “reckless” and demanding Twitter continue to protect their benefits such as remote working. “We demand to be treated with dignity, and not treated as mere pawns in a game played by billionaires,” Twitter staff wrote.
At Meta, staff are also facing the threat of cuts. In a letter to Zuckerberg, Brad Gerstner, chief executive of Altimeter Capital, which owns a $340m stake in the social media company, urged it to cut costs and staff numbers. “Meta needs to get fit and focused,” Gerstner wrote. To do this, he recommended cutting spending on its experimental metaverse technology by $5bn and reducing overall headcount by 20pc, more than 15,000 people. “It is a poorly kept secret in Silicon Valley that companies ranging from Google to Meta to Twitter to Uber could achieve similar levels of revenue with far fewer people,” wrote Gerstner.
“I would take it a step further and argue that these incredible companies would run even better and more efficiently without the layers and lethargy that come with this extreme rate of employee expansion.”
Ives agrees. “The tech industry has over-hired,” he says.
Some big tech companies are still recruiting aggressively. Google’s headcount grew from 150,028 last year to 186,779, according to its most recent results for the three months ending in September. Sundar Pichai, the chief executive, said it planned to slow hiring for the rest of the year. Google has, however, cut back on travel, enforcing a “business critical” only rule – no more socials or team offsites.
Meanwhile, Microsoft laid off 1,000 staff, out of a total headcount of 220,000, earlier this month and Snapchat laid off 20pc of its 6,400 employees due to a slowdown in advertising technology.
It is not just listed big tech companies. Private, venture capitalbacked start-ups are being forced to rapidly adjust to the new economic outlook. In May, start-up incubator YCombinator, whose alumni include companies such as digital bank Monzo and Airbnb, wrote to founders: “The safe move is to plan for the worst.” It advised cutting costs so companies had 30 months of cash on hand to survive a long recession.
The cuts are also affecting UK tech jobs. The deep layoffs at Snapchat saw the departure of staff from WaveOptics, a display technology company it acquired a little over a year ago for $500m. WaveOptics chief executive, David Hayes, departed at the same time.
Elsewhere, streaming company Dazn has cut engineering jobs in London. In Europe, German food delivery company Gorillas has made 300 people redundant. And Klarna, the buy-now, pay-later company, reduced headcount by 10pc after its valuation fell from $46bn to $6.7bn.
Steve Sarracino, founder of venture capital firm Activant Capital, which has $2.5bn under management, says big tech companies face a reckoning.
“They haven’t done [ job cuts] for so long,” he says. “Remember, we’ve had a 12-year run. There’s a lot of pushback on any type of cuts.
“Over the next three months, we’re going to see pretty deep cuts at a lot of the larger tech companies, and the justification is going to be that they’ve got a lot of big misses coming out.”
If financial results continue to disappoint, nap pods and long lunches will soon be a distant memory.
‘Companies ranging from Google to Meta to Twitter to Uber could achieve similar levels of revenue with far fewer people’