March 14 (Reuters) – Facebook parent Meta Platforms (META.O) announced on Tuesday that it will cut 10,000 jobs this year, becoming the first big tech to face a second round of mass layoffs announces as the industry prepares for a deep economic downturn.
Meta shares surged 6% on the news. The widely anticipated job cuts are part of a restructuring that will see the company scrap hiring plans for 5,000 open positions, scrapping lower-priority projects and “flattening” layers of middle management.
They followed the company’s first mass layoffs in the fall, which eliminated more than 11,000 jobs, or 13% of the workforce at the time, after a hiring wave doubled the workforce in 2020.
Concerns about an economic downturn due to rising interest rates have led to a spate of mass job losses at American companies in recent months. Tech companies have laid off more than 290,000 employees since early 2022, according to tracking site Layoffs.fyi.
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Meta’s downsizing was one of the most pronounced in the industry. In addition to inflationary woes, the company also faces unique threats to its core digital signage business while spending heavily on Chief Executive Mark Zuckerberg’s plans to build a futuristic metaverse.
In a message to employees Tuesday, Zuckerberg said most of the new cuts would be announced in the next two months, although in some cases they would last through the end of the year.
“For most of our history, we have experienced rapid sales growth year over year and have had the resources to invest in many new products. But the past year has been a humbling wake-up call,” Zuckerberg wrote.
“I think we should prepare for the possibility that this new economic reality will continue for many years to come.”
Zuckerberg said he plans to further reduce the size of the recruiting team, which was already hit hard by the fall layoffs. Reshuffles in the technology group would be announced in late April and cuts in business groups would come in May.
Meta will also remove multiple layers of management and ask many managers to become individual contributors, while eliminating non-technical roles, automating more functions and reversing, at least in part, a commitment to “remote-first” work that Zuckerberg imposed amid COVID-19 -Pandemic lockdowns received.
[1/3] A man takes a selfie in front of a sign from Meta at its headquarters in Menlo Park, California, U.S. October 28, 2021. REUTERS/Carlos Barria/File Photo
SATISFIED INVESTORS
The first of the recent wave of cuts appeared to have started before Zuckerberg’s announcement. On Friday, Meta said it was reviewing “strategic alternatives” for Kustomer, a customer service company it acquired last year.
It also disbanded its skunkworks New Product Experimentation Team and hired lead Ime Archibong to work on a product for Messenger, according to an internal Reuters memo. Both changes were originally reported by the Wall Street Journal.
Investors have grown wary of Zuckerberg’s prolific spending as sales growth at Meta’s core businesses slowed amid high inflation and a digital advertising pullback from the pandemic e-commerce boom.
The company is also struggling with Apple-led (AAPL.O) privacy changes and competition for young users from short-video app TikTok.
At the same time, Meta has poured billions of dollars into its metaverse-centric Reality Labs unit, which lost $13.7 billion in 2022, and invested in infrastructure to support the use of artificial intelligence.
Wall Street has steadily rewarded Meta since its reorganization in November after its stock price fell more than 70% in early 2022. The stock received another boost in February when Zuckerberg called 2023 the “year of efficiency,” with new cost controls and a $40 billion share buyback.
The recent downsizing shows “how desperate the company is trying to get costs under control as its revenue has fallen amid shrinking marketing budgets,” said Susannah Streeter, an analyst at Hargreaves Lansdown.
“Virtual reality is an expensive business. So while (Meta) charts a path through an uncertain landscape, it has to find efficiency elsewhere,” she added.
In his memo, Zuckerberg barely mentioned virtual reality, instead emphasizing the company’s focus on AI. He said Meta’s single biggest investment is “promoting AI and building it into every one of our products.”
Meta has teased AI-powered “creative tools” that can generate images, videos, and text, but doesn’t yet offer such products in its apps, though peers have launched dueling generative AI chatbots and productivity tools in recent months.
With the latest cuts, Meta expects spending in 2023 to be between $86 billion and $92 billion, down from the $89 billion to $95 billion previously forecast.
Reporting by Katie Paul in New York and Nivedita Balu and Aditya Soni in Bengaluru; Edited by Anil D’Silva and Nick Zieminski
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