Banks seem to be prepping for an economic downturn, and it appears the tech sector is doing the same.
On Monday, Microsoft announced another round of layoffs. That news was first reported by Axios and is said to affect fewer than 1,000 people, which constitutes less than 1% of Microsoft’s more than 200,000-person workforce.
But the tech giant is hardly alone as companies across the industry increasingly move to cut jobs and scale back recruitment after years of rapid hiring.
“All this crazy bubble capital that’s been flowing into tech is now starting to come to its senses,” said Rita McGrath, a professor at Columbia Business School. “So we’re a little bit in the hangover period after the party’s done.”
Microsoft declined to confirm the scope of the layoffs to Marketplace. But in a statement, it said that — like all companies — it evaluates “business priorities on a regular basis” and adjusts accordingly.
Demand for Microsoft’s products exploded early in the pandemic, according to Tejas Dessai, research analyst at Global X ETFs.
That includes its cloud franchise, “which witnessed that growth boom during the pandemic,” he said. “Businesses of all sizes relied on cloud technologies to keep running.”
The Xbox segment also did well, Dessai added. But as everything from gaming to advertising technology slows down, many tech companies are cutting headcount — some by 2% to 5%, per Wedbush Managing Director Dan Ives.
“I think a lot of CEOs within the tech industry are bracing for what could be an extended period of pain and that’s why they’re cutting ahead of that,” Ives said.
Those layoffs could benefit early-stage ventures, many of which are in the process of being funded right now, said Jose Benitez Cong, head of talent at Humane, a mobile startup.
“They basically have the pick of the litter, and less competition than, say, nine to 12 months ago,” he said, adding that those younger companies have an opportunity to grow — even in a downturn.
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