What's the financial sense behind big tech layoffs ?
Big Tech (MAANG) layoffs have a whopping <5% savings in terms of revenue. Meta laying off 11K employees at avg 400K = $4.4 bil savings against 88 bil revenue, i.e. 5% savings. After that they splurge $15 bil in metaverse madness https://www.cnbc.com/2022/10/26/meta-plans-to-lose-even-more-money-building-the-metaverse.html Amazon laying off 10K employees at avg 300K = $ 3 bil savings against 400 bil revenue, i.e. 1% savings. PLEASE READ for people ranting about REVENUE vs PROFIT: ""Some might argue that one should compare profit and not revenue, but numerous unicorns are built on revenue have not seen a single dollar of profit. Amazon's rise to trillion dollar market cap wasn't on its 1-2% profit (or loss in initial years) but revenue. Market cap (i.e. stock price) is mostly decided on revenue and not profit. Also, these companies have cash reserves to survive for a long time."" If google were to lay off similar 10K employees at avg 400K = $4 bil savings against 250 bil revenue, i.e. <2% savings Ref https://www.forbes.com/sites/jonathanponciano/2022/11/15/billionaire-hedge-fund-investor-urges-alphabet-to-cut-costs-no-justification-for-salaries-that-are-too-high/?sh=4774fa3f3d97 Why is this experienced hedge fund manager chasing <2% savings , that too from layoffs. Just reducing overall comp by 2% will have same effect. Easy way to do this - year end bonuses / refreshers reduced by 20% - 12% bonus instead of 15% bonus won't move a needle in anyone's life - 20% less refreshers , of an unknown amount as it's not tied to base, won't affect morale in this macro environment. - I guess people just lack empath in this world of capitalism , ready to butcher a minority for savings inspite of an alternative. Wtf am I missing ? Sorry, but please don't include Twitter madness in big tech.
Forbes
Would you accept a paycut and stay at your company?
It's not a pay cut, there's no guarantee on amount of refreshers / bonuses. Getting 10% less bonus , i.e. 13.5% of base instead of 15% base won't move a needle in anyone's life. Getting 10% less refreshers, of an amount that people don't even know, since it's not tied to base, won't even affect morale.
You can count on them cutting back on stock refreshes once they can’t spend as much on buybacks.
Look at the cost savings as part of earnings, not revenue
Meta's net profit for Q3 was $4.4B and Amazon's was $2.9B.
Already mentioned in post, amazon was always paper thin profit margins on it's rise to a trillion dollar market cap, profit was never the driver, as it isn't for numerous tech unicorns.
Google - you are making false statements and acting as if they are facts. Compare savings with net income. The end.
Avg:400K tc for those 11K impacted Or its overall cost to company?
11K impacted. rough estimates.
Cost saving affects the bottom line, not the top. This whole post makes no sense.
bottom line (aka profit) was never the driver for rise of unicorns and trillion dollar giants, it was always top line (aka revenue).
Just because it's not the "driver for the rise of unicorns" (whatever that means) doesn't mean nobody cares about profit. I'm no investor but it certainly seems like an important metric to monitor, maybe not top 1 metric but perhaps top 10 metrics. And why limit yourself to just a few data points when more exist?
5% is a lot.
Lol this topic is way beyond your pay grade buddy
Agreed, but that true for everyone on blind, and shouldn't stop me from trying to understand something.
The way i think about the current situation is that this is the first real time for layoffs can occur with muted consequences. While some companies certainly don't need to layoff, they can do it now and see how a smaller workforce and/or emphasizing productivity (more PIP, harsher performance reviews, etc) will impact top/bottom line. It is a gamble, but is tenable strategy in this current economic environment. They can always hire more in the future as well.
Well why not both (reduction of year end bonus, refresher + layoffs). That’s essentially what’s happening with bonus multipliers and RSU prices going down naturally.
In a financial sense, revenue and profit is not the proper measure, it’s manipulated by accounting rules and non-cash items. Net profit does not take into account actual cash received or debt payments, etc. It’s cashflow of the business that really matters. If you look at Amazon’s free cash flow for example it’s negative. Yes they are profiting, but the actual cash available to the business after operations is negative because those profits are spent on capital expenditures(building facilities)/debt/etc. So they are burning cash. Same with meta, billions in profit but all of it is going to meta verse. Firing 10k people = access to billions in cash they don’t have and they don’t have to borrow at higher interest rates.
This is a great answer. On top of that, many investors are not looking at some of these companies so much as growth companies anymore, so revenue is also the wrong metric to focus on (while it is for high growth companies).
Amazon's rise to trillion dollar market cap was never on the shoulders of it's paper thin profit margins (which are a recent event). It's always been the stock appreciation, that too on growing revenue, that's created wealth for shareholders and investors.
You stupid fam
Thanks smarty pants, please enlighten with some details.