Salesforce announced plans to cut about 10% of its workforce, becoming the latest technology group to reverse a recent hiring spree amid slowing demand and growing unrest on Wall Street.
The US software company had almost 80,000 employees at the end of October, about 6,500 more than at the end of January 2022. But the workforce jumped 30% the year before with the addition of almost 17,000 employees as Salesforce joined a hiring spree by big tech companies over what they believe is a sustained surge in demand for digital services caused by the pandemic.
In a letter to staff on Wednesday, co-founder and chief executive Marc Benioff blamed the cut in spending on deteriorating business conditions, but admitted to misreading the strength of demand as the Covid-19 crisis escalated. attenuated.
“As our revenues have accelerated during the pandemic, we have hired too many people leading to this economic downturn that we are currently facing, and I take responsibility for that,” he said.
The abrupt reversal ensues deep job cuts In other tech groups in recent months, rising interest rates have hurt soaring stock prices of high-growth companies and sparked an investor backlash against bloated spending plans.
Companies that have cut spending include Meta, which announced in November that it cut 11,000 jobs after his earlier reluctance to rein in spending angered Wall Street. Alphabet has also come under pressure from an activist investor to cut spending after a rapid ramp-up in hiring, although it has so far only cut costs in a number of marginal operations.
Selling power said it would close some offices as part of its restructuring plan, which it said was designed to improve operating margins and support its “ongoing commitment to profitable growth”. The 24-year-old company has been at the center of simmering unrest on Wall Street for years over its continued focus on growth at a time when many investors thought it should focus on profits.
The concern erupted into the open last year as weakening demand gnawed at growth, with activist fund Starboard Value taking an unspecified stake. Starboard attacked the company for what it called “a below-average mix of growth and profitability” and said it failed to take advantage of its market-leading position to boost profits.
Salesforce shares have fallen 55% from their late 2021 high, cutting about $170 billion from its market value. The drop reflects a revaluation of many software stocks, which had been among the biggest gainers during the recent harsh tech boom. It also comes as many companies have started to warn of weakening demand.
“The environment remains challenging and our customers are taking a more measured approach to their buying decisions,” Benioff said Wednesday.
The Salesforce chief’s attempt to appease Wall Street comes in the wake of senior executive departures that have left questions about his long-term leadership. Co-GM Bret Taylor announced his departure in November, surprising many who expected him to succeed Benioff as sole GM. Other senior executives from include product manager Tamar Yehoshua and Stewart Butterfieldgeneral manager of the messaging service Slack, owned by Salesforce.
Salesforce expects to incur approximately $1.4 billion to $2.1 billion in costs associated with its new restructuring plan. About $1 billion to $1.4 billion of that is expected to be related to employee transitions, severance, benefits, and equity compensation. Office space reduction costs are expected to be approximately $450-650 million.
Employee restructuring is expected to be “substantially” complete by the end of the company’s 2024 fiscal year.
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