Explained: Why tech giants are laying off staff globally
What’s the deal with some of the most successful firms that people want to be a part of suddenly losing money and then laying hundreds of workers off?
It’s the kind of earthquake that the technology industry has been through in the past few months and weeks in the form of economic difficulties and unprecedented cuts, some of which impact the giants or the big tech.
Microsoft is one of the biggest companies in the industry and has been adamant about laying off employees. It has given in to the evidence the CEO of Microsoft, Satya Nadella, confirmed the layoffs on Wednesday. The company has a workforce of 10,000. US companies are now with no work.
The same thing has happened the same way with Google Google: one of the companies that have an image of being more attentive to its employees has announced the firing of 12,000 staff, which is 6 percent of its workforce and the start of a change to ensure its future on an international scale. Economic.
This move is a first within the past of these two multinationals has precedents in other companies operating in the technology industry; however, and it’s not required to be only one month in the past, following Amazon’s departure of more than 18,000 employees of Amazon and the 11,000 layoffs at Meta.
What we are The mirage of a market that was constantly expanding and grew exponentially with COVID-19
First, it is crucial to know the roots of our existence. One thing that you can use the Nasdaq 100 is handy. The index tracks telecom and technology businesses in the United States.
” Getting big tech growth has been the defining motto of the post-global financial crisis investment regime,” Trevor Noren, thematic investment strategist at Wellington Management, noted in an earlier commentary.
This is something research suggests. In 2011 the five most influential companies of the S&P 500 Index accounted for only about 10 percent of market capitalization. In 2022, the majors of the technology industry -Apple, Amazon, Microsoft, Google and Meta made up more than 24 percent of the index.
This isn’t an accident. However, it has had an unexpected ally, the COVID-19 virus. The outbreak has made businesses around the globe dependent on technology for running, such as digitization or e-commerce. An undiscovered video calling technology, Zoom, suddenly becomes the largest.
And the industry is increasing faster than ever.
In January 2020, it was estimated that the Nasdaq 100 was around 9,000 points in the world before the pandemic. In 2021 during November, the technology index hit its highest data level, 16573 points. However, it won’t ever happen ever again.
What’s next is the end of a technological era while investments are still needed.
After the final effects of the pandemic on the economy, the next challenge will arise. 2021 is such a great year that when 2022 kicks off with the conflict in Ukraine to its credit, every comparison is unfavorable. Many of the sanitary restrictions that accelerated the sector came to an end.
This is accompanied by an overall drop in tech stocks and the loss of profits, and sometimes in revenue, for the biggest companies in the sector.
In the particular instance of Microsoft, the company has lost over 23% of its market capitalization over the last year. Its revenue grew in 2022, thanks to the growth of cloud services, which grew by 11 percent in the 3rd quarter-however, the net profits have been declining by 8% in its most recent figures.
Google’s decline is more severe: it has dropped 30 percent of its capitalization within a year. Recent results reveal that although its turnover has increased since 2022, its advantages have remained strong, with a decrease of 8.3 percent, 13.6% and 26.5 percent in the second, first and the 3rd quarters.
Since November 2021 since November 2021, the Nasdaq 100 has been falling steadily to the point that it is at around 11,000 points, and there is no indication of it going back, at least not in the near term. The recent generalized inflation is an enormous threat.
“Will that profitability dominance continue in this new inflationary regime? There is mounting evidence, both cyclical and structural, that the answer is probably no,” Wellington Management forecasts.
However, the reality is that only some market data is good. Also, the decline of the technology-based ones might not be so, or it is not as bad as the industry average.
A Gartner forecast suggests that in 2023, global spending for information technology (IT) will increase by 5.1 percent to $4.6 trillion.
“We are aware that a recession is likely, we are aware that budgets are likely to be cut, but [investment in technology] is an item that in most cases – especially for large companies – is not you can cut too much,” says Noren.
In the same way, there was a significant drop in at the same time, the Nasdaq 100 Tech Index, which is a gauge of the tech sector, was down over 30% by 2022 as compared with the S&P 500 Index’s fall of around 20 percent.
However, an excellent firm hasn’t cut staff until 2022 and will continue until 2023. Apple.
The maker of the iPhone In fact, the iPhone’s creator has increased its workforce in the last two years, and the workforce is 20 percent according to available information, which is 164,000, which is 27,000 more than the end of 2020.
In an interview with its chief executive officer, Tim Cook, on CBS, he acknowledged that his company was employing “very carefully” in hiring because of the economic uncertainty; however, hiring has not been stopped.
There are a lot of unknowns to be addressed in 2023 within the field of technology that will need to be confronted with significant challenges. Layoffs are just one of them. However, experts like Jose Antonio Cano, an IDC analyst, stress that ” within the ICT sector, there’s an urgent need for skilled professionals, “and it takes months to fill positions in technical fields.
However, we also have to consider other significant challenges like sales of goods, which dropped in 2022 because of inflation and are now facing the possibility of a recession in 2023. We must also consider whether revenue continues to increase and sustainably increase investments in ICT services related to digitization.
It is evident that the earthquake did not cease to cause aftershocks. Also, the handful of companies that still need to lay off, such as Apple, could shortly follow the same path as Microsoft and Google. They’re just a few instances of the end of the era of big fat cows in technology.