Meta to Cut More Than 11,000 Jobs, One of America’s Largest Jobs by 2022
Meta said Wednesday it will cut more than 11,000 jobs, or 13 percent of its workforce, as the Facebook parent doubles down on its risky bets amid a slumping advertising market and the highest inflation in decades.
The mass layoffs, among the largest this year and the first in Meta’s 18-year history, follow thousands of job cuts at other tech companies including Elon Musk-owned Twitter, Microsoft, and Snap.
Like its peers, Meta hired aggressively during the crisis to meet the increased use of social media by homebound consumers. But business has suffered this year as advertisers and consumers pull the plug on spending under rising costs and rapidly rising interest rates.
“Not only is e-commerce back to normal, but the recession, increased competition, and the loss of ad brands have caused our revenue to drop more than I expected,” Chief Executive Officer Mark Zuckerberg said in a message to employees.
“I am wrong about this, and I take responsibility for that.”
In a brief call Wednesday obtained by Reuters, a red-eyed Zuckerberg spoke to employees but did not take questions. He stuck to a text that closely followed the words of the morning blogpost and called the increased investment in e-commerce “a huge error in planning.”
He said he will hold another town hall on Friday where he will answer questions.
Meta, once valued at over $1 trillion (approx. Rs. 81.5 lakh crore), is now valued at $256 billion (approx. Rs. 21 lakh crore) after losing over 70 percent of its value this year alone .
Shares in Meta rose 4 percent on Wednesday as investors cheered a warning from a company that has been staking its future in trouble with expensive investments that Zuckerberg himself said would take a decade to pay off.
“The market is breathing a sigh of relief that the management of Meta or Zuckerberg seems to be listening to some advice, which means that it needs to get rid of the growing debt of costs,” said Hargreaves Lansdown analyst Sophie Lund-Yates.
The company now expects 2023 costs of $94 billion (approx. Rs. 7.7 lakh crore) to $100 billion (approx. Rs. 8.1 lakh crore), compared to $96 billion (approx. -Rs. 7.8 lakh crore) to $101 billion (about Rs. 8.2 lakh crore) indicated earlier. It also lowered its 2023 capital expenditure forecast range.
In addition to the job cuts, which will affect units across Meta with a negative impact on rental groups and businesses, the company will also reduce office space, reduce discretionary spending, and increase the hiring freeze in the first quarter to recover costs.
Metaverse cash burn
However, most of the remaining resources will go to the Reality Labs unit responsible for its variable investments. The business lost $9.44 billion (roughly Rs. 79,000 crore) from January to September this year, with losses expected to widen further in 2023.
The spending spree has angered Wall Street and shareholders, with one investor recently calling the investment “huge and scary.” Analysts also questioned how long Meta could invest in the project in a weak economy.
“They will have to continue to balance…Next year will be a difficult situation for them,” said Paul McCarthy at Kisco Capital, which previously owned Meta shares.
McCarthy added that he was skeptical about the company’s metaverse bet, and that rising interest rates and a major recession could continue to weigh on the ad market.
As part of the severance package, Meta will pay 16 weeks of basic salary plus two additional weeks for each year of service, as well as all remaining paid time off.
Affected workers will also receive shares that were due to work on November 15 and health care for six months, according to Meta, which had 87,314 workers at the end of September.
The company did not disclose the exact cost of the layoffs, but said the figure was included in previously announced 2022 earnings of between $85 billion (roughly Rs. 6.9 lakh crore) and $87 billion (roughly Rs. 7.1 lakh crore).
© Thomson Reuters 2022