When the Nasdaq stock index coughs, Silicon Valley catches a cold.
By announcing the elimination of around 12,000 jobs worldwide, Google is joining the club, less and less private, of Tech giants who are carrying out massive social plans.
Meta, the parent company of Facebook, Instagram and WhatsApp, got the ball rolling last November with the loss of 11,000 jobs, or around 13% of its workforce.
Amazon, Microsoft, Twitter, Snap followed with the departure of thousands of employees.
"We're seeing 5-10% cuts in the tech workforce because a lot of these companies, giants like start-ups, were spending money like 1980s rock and roll stars and need regain control of their spending in a less flamboyant macroeconomic context”, analyzes Dan Ives, director of the New York investment company Wedbush Securities.
A Pavlovian reflex
“It has become an almost Pavlovian reflex, when cycles turn around, for these companies to rationalize and cut marketing and advertising staff where it is easy to save money without jeopardizing their business and cash inflows”, also notes Julien Pillot, professor of digital economy and strategy at the INSEEC business school.
After years of crazy growth, especially during the pandemic, it's time for moderation.
“It's not a growth crisis but adjustments linked to a return to normal and inflation.
This cycle was expected by the ecosystem which is forced to reorganize itself in anticipation of the recession which will affect them in 2023”, relativized, about Amazon, Rick Kowalski, director of economic analysis and research of the Consumer Technology Association, the organizer of the world's largest Tech show.
An analysis that also applies to the Mountain View firm.
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"This was to be expected, as financial markets are shrinking from the recessionary shock and central bank interest rate hikes are depriving these giants of the big, easy money that was at the heart of their business model." , emphasizes Julien Pillot of INSEEC.
“They can no longer carry out all the R&D projects and refocus on their core business by cutting secondary initiatives and the skills that go with it,” he judges.
But the future could brighten up quickly.
"These layoffs are the first steps towards a stabilization of share prices on the stock market because investors want the leaders of these companies to anticipate the storm and preserve their margins, but this is only temporary and there will be a rapid rebound" highlights prospect Dan Ives.
