Lucknow(Coinchapter.com): Technology companies have endured a painful 2022 thus far. Amid global recession fears, heavyweights such as Amazon, Meta, and Twitter have had to enforce massive layoffs, while others, such as Apple, have had to freeze hiring.
With recent layoffs surpassing those seen during the initial dot com bubble crash, one question looms large — Are we heading into another cold tech winter?
Amazon Slash Workforce
Recently, Jeff Bezos’ led Amazon to join a list of top tech firms that had announced layoffs due to various operational issues. As per New York Times, the tech giant was preparing to lay off 10,000 employees to reduce costs — its biggest ever layoff in the firm’s history.
However, let us see what kickstarted the trend. Back in July 2022, Satya Nadella led Microsoft as among the first giant tech firms to initiate massive layoffs during the year. Citing a downturn in economic conditions, the company announced a layoff of nearly 1000 employees or xx% of its global workforce.
As of Nov 22, Microsoft’s workforce had shrunk to xx Million post the layoffs.
Social media network provider Meta was next to join the list. In October 2022, CEO Mark Zuckerberg announced that the social media giant would slash 13% of its workforce, or 11,000 employees, on the back of weaker platform engagement, lower ad revenues, and certain macroeconomic factors.
Elsewhere, Twitter CEO Elon Musk laid off around half of the company’s 7,500 employees in an attempt to find new sources of revenue or it would not “survive the upcoming economic downturn.” The likes of Netflix, Snap, Intel, and Robinhood are other names on the list that have cut down on the workforce to reduce costs.
Eerily, data shows that layoffs since January 2022 have surpassed those observed during the initial dot com bubble crash in early 2000.
Dotcom Bubble Deja Vu
Some comparisons can be made with the current tech sector environment to the one in early 2000,
In the early 1990s, tech firms were on a hiring spree as the internet era paved the way for many new companies.
As per the Federal Reserve Bank of Saint Louis, national employment in technology sector industries spiked by over 36% between 1990-2000, highlighting a green patch for the tech sector. A similar green patch was observed between 2009 to 2021, during which U.S. tech sector employment surpassed its level in 2000.
However, fresh layoffs in 2022 could end the bullish cycle, similar to what occurred during the early 2000s. According to the Tech layoff tracker, 789 tech firms, including Amazon, Twitter, and Meta, have laid off over 120,000 employees since the start of the year.
The figure is a notch above the layoffs observed during the infamous dot com bubble crash, where companies were forced to shed their workforce amid depleting capital resources.
What triggered the dot com bubble crash and the current tech sector decline seem to be two different factors.
For instance, the tech sector downturn in the early 2000s was largely due to financial-related issues. At the same time, the current decline appears to be a mix of operation issues coupled with a dampening global economy. However, while the causes seem different, the effects are similar.
Several analysts have claimed that the COVID-19 pandemic, Russia’s war on Ukraine, rising interest rates, and the resultant soaring inflation costs have peaked at an awkward time for companies across the globe.
Recently, the world’s richest man Jeff Bezos mulled over the same in a CNBC interview. He said, “The probabilities say if we’re not in a recession right now, we’re likely to be in one very soon,” adding that people should hope for the best but prepare for the worst.
In a way, the tech firms’ layoffs are a rather ominous sign for things to come, and one can’t help but wonder whether the upcoming winter will be the coldest one the tech sector has had to endure in over a decade.
