Every week, it seems that we see another Tech giant announcing layoffs. USA Today recently noted, “After a massive hiring spree in the first two years of the pandemic, industry giants like Amazon and Meta reversed course in 2022. There were at least 154,000 layoffs from more than 1,000 tech companies last year, according to Layoffs.fyi, a website that has been tracking tech layoffs since March 2020.
The website’s tallies – which are likely an undercount – have continued at a fast clip in 2023, with more than 55,000 layoffs recorded so far this year.
‘The number of actual layoffs is going to be much higher than what’s on the site just because most layoffs don’t get reported,’ Layoffs.fyi creator Roger Lee told USA Today. ‘Unfortunately, I don’t see the layoffs going away anytime soon.'”
Tech companies are especially susceptible to showing employees the door.
The Verge has written that “investors have changed how they’re evaluating companies, says Michael Cusumano, the deputy dean at the MIT Sloan School of Management. Generally, when companies are growing really fast — like when revenue is shooting up 20 percent or 30 percent a year — nobody cares about profits, Cusumano says. But we’re not in a growth period right now, so investors are being more cautious.
Tech companies have “tens of billions, often hundreds of billions of dollars, collectively, in reserves,” Cusumano says. “But they don’t really use that to support operations.” When an investor is reading an earnings statement, those reserves aren’t what they’re thinking about, either. One measure people use for measuring tech companies’ investment value is revenue per employee — and having hired all this staff during the pandemic, that means revenue per employee has gone down.
Software companies like Microsoft should have $500,000 in revenue per employee, or at least a minimum of $300,000, Cusumano says. “It could be higher than that, but when it starts to get below that, you start to worry that they’ve got too much headcount. So that’s something people look at on a yearly or even quarterly basis.”
The theory behind layoffs is that they save the company money, even though there’s an initial expenditure of millions or billions of dollars in severance. The idea is, with fewer salaries, the company’s costs are lower on an ongoing basis.”
One company that has gone against the grain, per usual, is Apple, which employs nearly 135,000 employees, including 65,000 at its retail stores. Apple hasn’t had major layoffs since the late 1990s. That’s when Steve Jobs returned to head the company and cleaned house.
The Wall Street Journal explained how Apple has avoided the pitfalls of its tech rivals. “No company is certain to avoid significant cutbacks in an economic environment as volatile as the current one, and Apple isn’t immune to the business challenges that have hit other tech giants. It is expected next month to report its first quarterly sales decline in more than three years. Apple has also slowed hiring in some areas.
The iPhone maker has been better positioned than many rivals to date in part because it added employees at a much slower clip than those companies during the pandemic. It also tends to run lean, with limited employee perks and businesses focused on hardware products and sales that have so far largely dodged the economic downturn, investors say.
From its fiscal year-end in September 2019 to September 2022, Apple’s workforce grew by about 20% to approximately 164,000 full-time employees. Meanwhile, over roughly the same period, the employee count at Amazon doubled, Microsoft’s rose 53%, Google parent Alphabet Inc.’s increased 57% and Facebook owner Meta’s ballooned 94%.
So far, Apple’s core business has shown itself to be resilient against broader downturns in the market. The other four tech giants have suffered amid slowdowns in digital advertising, e-commerce and PCs. In its September quarter, Apple reported that sales at its most important business—the iPhone—advanced 9.7% from the previous year to $42.6 billion, surpassing analyst estimates.
Although potential layoffs at Apple can never be ruled out, don’t expect the Think Different company to stop swimming against the current anytime soon.
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