Meta is planning to fire thousands of employees this week
What's the story
Large-scale layoffs could be on the horizon for Meta. The Mark Zuckerberg-led company is planning to cut thousands of jobs, The Wall Street Journal has reported. The first broad head-count reduction in the company's history might begin any time this week. The Facebook parent has been under significant financial strain for a while now. Meta is yet to make any comments on this.
Context
Why does this story matter?
Meta is all set to join the list of tech majors to slash jobs. Like its peers, the company hired aggressively during the pandemic, adding over 27,000 employees in 2020 and 2021. Now, with tech stocks losing their charm, the company is in a situation where it has to cut jobs. We don't know how many but we know that it won't be pretty.
Layoffs
Employees have been told to cancel non-essential travels
In terms of pure numbers, the expected layoffs at Meta could be the largest in a major tech corporation this year. At the end of September, the company had 87,314 employees. People close to the matter told The Wall Street Journal that employees could get notifications as early as this Wednesday. Employees have already been told to cancel non-essential travel this week.
Poor quarter
Last quarter, Meta's profits declined by 50%
Since the turn of this year, Meta's stocks have fallen by over 70%. The company's third-quarter results announced last month didn't show any signs of improvement as well. During the earnings call, Zuckerberg said that the company expects "to end 2023 as either roughly the same size, or even a slightly smaller organization than we are today." Last quarter, its profit slid by 50%.
Cutting costs
Company plans to reduce its expenses by 10%
Meta has been focusing on reducing its expense. Last quarter, the company's free cash flow declined by 98% due to rising expenses. In September, it was reported that the company is looking to cut costs by at least 10% in the coming months, including through staff reductions. The firm axed its once prominent Responsible innovation Team in September as part of targeted job cuts.
Reasons
Metaverse spending is the main reason behind company's increased expenses
Deteriorating macroeconomic trends, the competition from TikTok, Apple's privacy changes, and the decline in digital advertisement demand has affected Meta. However, Meta's focus on metaverse and Reality Labs remains the main cause behind its ballooned expenses. Since last year, the company has spent $15 billion on this effort without any great results to show for it. This has impacted investor confidence in the company.