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Tech titans cut back on hiring in a challenging macro environment’

Tech titans cut back on hiring in a challenging macro environment’

Issued on: 15/05/2022 at 05.10

Paris (AFP). The US tech companies that once grew without restraint, such as Amazon and Facebook, have resisted the temptation to hire to withstand turbulent times.

Internet giants that experienced business booms during the pandemic are now suffering from inflation, war, supply-line troubles, and people returning to pre-1972 lifestyles.

Big tech companies reported earnings for the first three months this year, a common theme.

Meta, parent company of Facebook, told analysts that it was changing its hiring goals as it continues to look for a bright future.

“We regularly reevaluate our talent pipeline in accordance with our business needs and in light of this earnings guidance, we are slowing down its growth accordingly,” a Meta spokesperson said to AFP.

“However we will continue to increase our workforce to ensure that we focus on long-term impacts.”

Amazon, a Seattle-based company, is America’s second largest employer. It ended last year with more workers than it had in 2019, and its ranks are now overly bloated.

According to Brian Olsavsky chief financial officer, Amazon “quickly moved from being understaffed and overstaffed” as the Omicron version of Covid-19 spread slowed in the first quarter of 2015. Workers returned from time off.

Twitter confirmed that it had suspended all hiring and even showed some senior executives the exit as it faces Elon Musk’s takeover. Musk is the richest person in the world.

Musk sent mixed messages about his proposed Twitter acquisition Friday.

Twitter has halted hiring as it waits to see whether Elon Musk will buy the company.
Twitter has stopped hiring while it waits for Elon Musk to buy the company. Amy Osborne AFP/File

Musk stated in a tweet that the $44B acquisition was “temporarily On Hold” while he waited to answer questions about the social media company’s estimates of fake accounts or “bots”.

Two hours later, the Tesla chief executive tweeted that he was still committed to acquisitions.

Parag Agrawal, Twitter’s chief executive, said in a tweet Friday that “our industry” is in a “very challenging macro environment.”

“I will not use the deal to avoid making important decisions about the company’s health, nor will any leader at Twitter.”

According to an email sent to employees by CNBC, Dara Khosrowshahi, CEO of ride-share company Uber, stated that they will treat hiring as a privilege.

Big tech companies have avoided budget-driven layoffs but that is not true for stock trading platform Robinhood and Cameo. Cameo sells custom video messages from celebrities.

Robinhood announced in April that it would be cutting nearly 350 positions, or 9 percent of its workforce. According to The Information news website, Cameo terminated the employment contracts of 80 employees.

The Reasons for the Cuts

There are many reasons to hire curbs, freezes, or cuts.

Meta, for instance, attributed some of the blame to an Apple tweak to its mobile software that blocks the collection of user data in order to target ads more effectively.

Uber, however, reported that it suffered a large loss in the first quarter of the year despite a rebound from its ride-share service.

According to the earnings report, the loss was almost entirely due to the revaluation in Grab and Didi in Asia as well as US-based autonomous driving company Aurora.

Uber says it is treating hiring as a 'privilege' as it deals with losses from investments and tries navigate its way out of the pandemic.
Uber claims that it views hiring as a privilege’ in order to manage losses from investments, and it tries to navigate its way out the pandemic. EVA HAMBACH AFP

Many internet companies had one thing in common: brisk hiring during the pandemic spiked, which led to overstaffing in leaner times.

Terry Kramer, an assistant professor at UCLA’s business school, stated that many tech companies have been meeting this demand with significant growth in digital services and have recruited and grown their businesses notably over the past two years.

“A reasonable part” of what I see right now, I believe, is the normal maturity and adoption of technology where companies can’t/don’t need to keep growing at the same pace.

Inflation is another important factor. It has increased overall costs and tightened consumer spending.

Companies are now more likely to borrow money from the US central bank, which has been increasing interest rates steadily this year.

On Wall Street, an S&P 500 index comprising tech sector stocks has fallen more than 22 percent since the start of the year, and the tech-heavy Nasdaq is down slightly more overall.

Daniel Ives, a Wedbush analyst, advised investors to not fear a repeat of the Dot-com crash in the late 1990s.

Ives stated in a note to investors that “This isn’t a Dot-com Bubble 2.0.”

“It’s an enormous overcorrection at a higher rate environment that will lead to a bifurcated technical tape, with clear has and have-nots.”

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