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Big Tech companies report $10 billion in costs due to job cuts and cost reductions

As the Big Tech firms report the high price they pay to reign down expenditure, it has been revealed that Amazon, Meta, Alphabet, and Microsoft will jointly face costs of more than $10 billion relating to mass redundancies, real estate, and other cost-saving initiatives.

In earnings results filed this week, the US corporations responsible for the most job layoffs in the IT industry reported the significant expenses associated to their reorganisation efforts.

The 50,000 layoffs announced by the four companies were intended to persuade investors that this would be a “efficient year,” as Meta CEO Mark Zuckerberg put it. This shift occurs following a period of overinvestment in pursuit of rapid expansion of the top line, which has lasted for more than a decade.

High initial expenses, such as severance payouts, are being incurred by the firms, but investors seem to be pleased by the measures being implemented.

The corporations’ market values have increased by almost $800 billion since they made their cutbacks official. Meta was the first of the big tech companies to announce layoffs, and since then, its stock price has increased by about 100%.

Dan Ives, an analyst at Wedbush, said that the markets were rewarding tech firms for “pulling the band aid off” rather than taking a more measured approach to cutting costs.

Over the last four to five years, “Big Tech” has been “spending money like 80s rock stars,” he claimed. The atmosphere has changed; there are grownups here now.

The trend toward leaner operations as a result of macroeconomic pressure stands in sharp contrast to the hiring boom that occurred during the epidemic, when IT businesses quickly added workers to meet the increased demand for digital goods and services.

Despite posting its first quarterly sales fall in over three and a half years on Thursday, Apple is the only major technology business that has not announced any job cutbacks or a cost-cutting strategy.

Nearly 250,000 workers have been laid off in the IT industry since the beginning of the year, as reported by Layoffs.fyi, a tracker documenting cases of tech redundancies.

This week has seen a spate of layoff announcements, with notable examples coming from the software company Okta, which announced the elimination of 300 positions, the data analysis firm Splunk, which announced the elimination of 325 positions, and the image sharing social network Pinterest, which announced the elimination of 150 positions.

The most severe criticism has come from prominent figures. Meta said in November that it will be closing down 11,000 offices and closing down dozens of data facilities.

The Facebook parent company announced $4.6 billion in restructuring costs on Wednesday. According to the company’s statement, severance payments totaled $975 million, but “decreases in payroll, bonus, and other benefits expenditures” helped to balance this. In 2023, we anticipate spending another $1 billion on office consolidation costs.

Amazon CEO Andy Jassy said in January that the business will be eliminating 18,000 jobs.

Amazon CFO Brian Olsavsky told investors on Thursday that the company paid $640 million on severance in the fourth quarter of 2022, and an extra $720 million on abandoning real estate, mostly as a result of slowing the rollout of new physical grocery shops. The business did not provide any more information on potential costs for the current fiscal quarter or later.

Alphabet, the parent company of Google, has said that it would lay off 12,000 employees and that it expects severance expenditures of $1.9 billion to $2.3 billion, with the majority of the effect occurring in the current quarter. The highest end of the range would translate to a severance expense of almost $191,000 per worker. In the current quarter, Alphabet expects to incur an additional $500 million in expenses related to office space reduction.

CFO Ruth Porat assured investors on Thursday that Alphabet will continue “hiring in critical areas, with a particular emphasis on top engineering and technical talent, as well as on the worldwide footprint of our people,” despite the layoffs.

Microsoft had a $1.2 billion charge in the last three months of 2022, $800 million of which was from severance compensation, as a consequence of its targeted reductions, which include the elimination of 10,000 jobs.

Having disclosed a 10% decrease in staff last month, Salesforce is also anticipated to be facing major restructuring charges when it reports profits in March. With its multibillion-dollar investment, activist investor Elliott Management pledged to “constructively with Salesforce to capture the value befitting a firm of its magnitude.”

Similarly, TCI Fund Management activist Sir Christopher Hohn has called for further layoffs and a reduction in “excessive staff remuneration” at Alphabet in a letter to CEO Sundar Pichai.