“Wholesale” layoffs in the tech sector are continuing, and major companies are still announcing thousands of layoffs and plans to cut staff. So what happened to the sector that it reached this extent of declining profits and resorting to reducing expenses?
The technology sector witnessed a boom in profits during the spread of the Corona epidemic. After the closure in the countries of the world, employees resorted to working remotely, students to studying from home, and families secured their purchases through online stores, in addition to the growth in online games and movie companies.
Faced with this reality, many technology companies resorted to expansion and increased the number of their employees in order to meet the high demand and increase profits and their investment projects.
However, after the epidemic receded, and life returned to normal in several countries, the demand for technology was no longer what it was in the year 2020, which changed the equations and led to a shock in the sector.
This is what is extracted from the CNN report, which indicated that during January 2021, Microsoft CEO Satya Nadella talked about how the first year of the epidemic brought about a stunning shift towards online services, which benefited his company from this process.
“What we have witnessed over the past year (2020) is the dawn of a second wave of digital transformation sweeping through every company and every technology industry,” he said.
But, CNN noted, two years later, the situation has become “more dire,” and Microsoft recently said it plans to lay off 10,000 employees.
And Microsoft is not the only company facing such a reversal after the Corona recedes and the closing policies. Alphabet, the parent company of Google, said it plans to cut about 12,000 jobs, or more than 6 percent of its employees.
Over the past three months, Amazon, Google, Microsoft and Mita have announced plans to lay off more than 50,000 employees, which is the opposite reality of the first months of the pandemic when the technology giants were growing rapidly to meet the high demand when buying and working online increased, when the expectations of a large number of Business leaders in the world of technology to continue growth in the sector, according to CNN.
The CNN report mentions that many other factors hit the technology sector, as it said, “Rising interest rates, inflation, and fears of recession, all of these things have led in recent months to a decline in advertising and consumer spending, which affected the profits of technology companies and stock prices.”
“Companies in the sector made the wrong strategic decisions at the wrong times,” said Scott Kessler, an expert in technology companies.
Regarding the compensation of laid-off workers, CNBC stated in its report that “the laid-off workers will receive severance packages of varying size and duration depending on their place of work.”--
As for Microsoft, which said, on Wednesday, that it would lay off 10,000 employees. The cuts will run through the end of March, and CNBC reported that sales and marketing teams will see larger cuts than the company’s engineering teams.-
Nadella wrote that American employees will receive severance pay, six months of Medicare and stock entitlement, and 60 days of notice.
Microsoft will bear $1.2 billion in restructuring and layoff costs.
As for Amazon, which started the latest wave of layoffs, CNBC says that for retail employees in the United States, Amazon offers full pay and benefits over 60 days. After this period, Amazon offers laid-off employees several weeks of severance pay, health benefits, and more.
At Mita, each laid-off employee is promised 16 weeks of severance, plus health insurance coverage for a predetermined period of time, and other benefits.
But in December, some laid-off workers told CNBC that they were receiving severance packages that were substandard compared to those of newly laid-off employees. Instead of 16 weeks, they received only 8 weeks of basic salary, not to mention other material differences.
And Apple remains steadfast, among the technology companies that have seen “wholesale” layoffs. Although Alphabet on Friday became the latest technology company to announce large-scale layoffs, Apple retains its stamina, which may soon lose some of it, according to some reports.
The Wall Street Journal indicated that “no company is certain that it will avoid large layoffs in a volatile economic environment such as the current one,” considering that “Apple is not immune to the business challenges that afflicted other technology giants.”
From the end of the fiscal year in September 2019 through September 2022, Apple’s workforce has grown by about 20 percent, to nearly 164,000 full-time employees.
However, over the same period roughly the number of employees at Amazon doubled, the number of employees at Microsoft increased by 53 percent, Alphabet increased hiring by 57 percent, and the number of employees at Meta swelled by 94 percent.
According to the Wall Street Journal, Apple has about 65,000 retail employees, working in more than 500 stores, and they make up about 40 percent of the company’s total workforce.