June 9, 2023

Dubai Week

Complete Dubai News World

Why do tech companies let go of thousands of employees? – Al-Qat newspaper

Despite some solid balance sheets, big tech companies have laid off thousands of workers since the start of the year. However, according to a report by CNBC, the driver behind this campaign is economic uncertainty, which is holding back these companies further.

The wave of layoffs affected thousands of employees from the US to Asia and Europe at several tech giants around the world, such as Microsoft, Google and SAP.

But the irony is that most of these companies are profitable, according to CNBC.

Financial services firm Jefferies said the wave of layoffs came after tech firms saw a surge in hiring amid the coronavirus pandemic, and slower-than-expected and lower-than-expected growth.

Exacerbating the situation is the rise in inflation and interest rates, which are curbing investor spending amid global economic uncertainty.

CNBC used a Bank of America report to illustrate what happened with small firms in particular, which showed that the increase in employment at startups was driven in part by low-cost access to capital.

Meanwhile, on Wednesday, the US Federal Reserve raised interest rates by a quarter of a percentage point, continuing its policy aimed at curbing high inflation, and the interest rate is currently in the range of 4.75 to 5 percent. , its highest level since 2006.

In its report, on Thursday, CNBC profiled the most prominent tech companies that entered the wave of layoffs despite making profits on their budgets.

Among these companies, Microsoft posted a net profit of $16.4 billion in the quarter ended in late December, down 8 percent from a year earlier.

Microsoft CEO Satya Nadella noted in the annual report that the company delivered “record results” for the 2022 fiscal year ended June 30.

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Despite this, Microsoft announced in January that it would lay off 10,000 employees.

Likewise, Google’s parent company Alphabet announced in January that it would cut 12,000 jobs after some problems in the fourth quarter, despite managing to achieve 1 percent year-over-year revenue growth in the quarter ended December.

Amazon, which laid off more than 18,000 employees in January and is expected to shed 9,000 more in the coming weeks, despite posting good earnings for the final quarter of 2022 that beat analysts’ estimates, CNBC reported. However, 2022 will be a slow year for Amazon’s growth.

As for the German company SABB, it achieved an increase in revenue in addition to a positive growth in profits, however, in January it announced that it would cut 3 thousand jobs.

A CNBC report touched on Singapore-based tech giant Sea Group reporting net income of about $422 million in the fourth quarter of 2022, the company’s first quarterly profit since its inception in 2019.

In the past year, the company has reportedly cut more than 7,000 jobs, or 10 percent of its workforce.

Also, Dell Technologies posted $102 billion in revenue for fiscal 2023, up 1 percent from a year earlier, and in February announced plans to lay off 5 percent of its workforce, or about 6,650 workers.

CNBC concluded its report with Apple, which has thus far avoided mass layoffs, hiring at a slower pace than Google, Amazon, Microsoft and Meta.

Technology companies are vulnerable to global economic conditions, particularly in terms of high inflation, recessions and rising interest rates.

The Federal Reserve on Wednesday expected the inflation rate to be slightly higher than expected in December this year, at 3.6 percent compared to 3.5 percent, while gross domestic product expected to decline 0.4 percent compared to 0.5 percent. At a rate of 1.2 percent in 2023, compared to 1.6 percent in 2024.

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The central bank warned in a statement that the recent banking crisis “is likely to weigh on economic activity, employment and inflation (..)”, noting that “the magnitude of these effects is uncertain”.

However, he reaffirmed that “the US banking system remains solid and resilient” and that the group responsible for monetary policy “remains cautious about inflationary risks,” according to AFP.

In light of this, Wall Street closed trading on Thursday after it aired statements from Treasury Secretary Janet Yellen that they would take steps to protect Americans’ deposits as assurances in the hearts of dealers.

Yellen’s comments came the day the Fed raised interest rates by a quarter of a percentage point, and the Senate was on the verge of scrapping comprehensive deposit insurance.

The maximum deposit insurance limit is $250,000, according to the free site.

According to preliminary data, the S&P 500 index rose 11.12 points, or 0.28 percent, to end at 3948.09, while the Nasdaq composite gained 116.85 points, or 1 percent, to 11786.81. And the Dow Jones industrial average rose 66.08 points, or 0.21 percent, to 32,096.19, according to Reuters.