Tech industry increases layoffs

Three sources of informationReutersNetworking giant Cisco is planning to restructure its business, including laying off thousands of employees, to focus on high-growth areas, the company said.

The company is still calculating the total number of employees affected by the layoffs. The earliest an announcement could come next week. Cisco will have 84,900 employees in fiscal 2023. The company recently cut its revenue and profit forecasts, a sign of slowing demand for its networking gear.

In recent years, the company has struggled with supply chain issues and a drop in demand following the pandemic, prompting it to accelerate software services like cybersecurity. In November 2022, it announced a restructuring that would affect about 5% of its workforce and result in about $600 million in severance and related costs.

Cisco’s move adds to a wave of tech layoffs that continued earlier this year in the U.S., with other tech giants including Amazon, Alphabet and Microsoft all announcing layoffs in recent weeks.

Specifically, Amazon cut nearly 5% of its Buy with Prime staff, 5% of its Audible audiobooks and podcasts division, hundreds of people working in its recording studio and streaming, 35% of its Twitch streaming unit, and several hundred people at its One Medical and Amazon Pharmacy health care units.

At Alphabet, dozens of people are leaving the new technology division X Lab. The advertising sales team is being cut by hundreds. The hardware teams responsible for Pixel, Nest, and Fitbit are also cutting hundreds of jobs. Meanwhile, Microsoft is cutting about 1,900 jobs at its gaming divisions Activision Blizzard and Xbox.

Several other familiar names in the tech industry are also expected to lay off hundreds to thousands of workers. For example, e-commerce company eBay plans to cut about 1,000 people, or about 9% of its workforce.

For example, video game software provider Unity Software will cut about 25% of its workforce, equivalent to 1,800 positions. Chat and social networking platform Snap is also reducing its team by 10%, equivalent to more than 500 people.

More than 191,000 workers at US-based tech companies were laid off in mass layoffs last year, and the trend is expected to continue through 2024, according to online data platform Crunchbase.

Notably, companies continue to lay off workers even as revenue and profits are positive, stock prices are soaring, and the U.S. economy is strong. This is because the tech industry faces two challenges: a rapidly expanding workforce during the pandemic and the rise of artificial intelligence (AI).

Accordingly, from late 2019 to 2023, technology companies tried to catch up with the explosion in demand from users as they were stuck at home due to the pandemic lockdown and spent more time online. In total, during this period, Apple, Amazon, Meta, Microsoft and Alphabet created a total of more than 900,000 jobs.

The five companies now employ 2.16 million people, 71% more than before the pandemic. They generated a combined $1.63 trillion in revenue in their most recent fiscal years, up about 81% from the previous five years, according toCNBC, Silicon Valley's rapid pace of layoffs is an effort to be leaner after overexpansion during the height of Covid-19.

In addition, despite the constant news of layoffs, technology companies are also constantly recruiting people to serve the development of AI. According to the technology training organization CompTIA, there are 180,000 job postings in the US related to AI.

In fact, in a recent announcement, IBM outlined plans to lay off some employees but said it would hire more AI people. Last week, Mark Zuckerberg said Meta had to lay off employees and control costs so it could “invest in the ambitious, long-term vision around AI.”

In the eyes of Wall Street, tech companies’ layoffs are a good thing. Investors are praising them, especially the big tech companies, for their cost discipline. And as long as investors remain bullish on tech stocks, the pace of job cuts in the industry will continue to accelerate, according toCNBC.