Salesforce to cut 10% of workforce after hiring "too many people"
Reuters
Published Jan 04, 2023 06:39AM ET
Updated Jan 04, 2023 03:56PM ET
By Nivedita Balu
(Reuters) -Salesforce Inc said it plans to cut jobs by 10% and close some offices, after rapid pandemic hiring left it with a bloated workforce amid an economic slowdown.
The cloud-based software firm said on Wednesday the job cuts would lead to about $1.4 billion to $2.1 billion in charges, while only about $800 million to $1 billion will be recorded in the fourth quarter.
Companies from Meta Platforms Inc (NASDAQ:META) to Amazon.com Inc (NASDAQ:AMZN) have slashed thousands of jobs in the past year, in preparation for a recession, expected as a result of aggressive interest rate hikes by global central banks to curb inflation.
Businesses that relied on cloud services during the pandemic are now trying to reduce expenses and are delaying new projects, hurting companies such as Salesforce (NYSE:CRM) and Microsoft Corp (NASDAQ:MSFT).
"The environment remains challenging and our customers are taking a more measured approach to their purchasing decisions," Salesforce co-Chief Executive Officer Marc Benioff said in a letter to employees.
"As our revenue accelerated through the pandemic, we hired too many people leading into this economic downturn we're now facing, and I take responsibility for that."
Salesforce had nearly 80,000 employees at the end of the third quarter, up from about 70,000 a year earlier.
The company said in its quarterly regulatory filing that it increased headcount "to meet the higher demand for services".
Salesforce shares were up 3% on Wednesday. They lost roughly half their value in 2022 as Salesforce posted four consecutive quarters of slowing growth.
"It (the company) is certainly not alone as the sector has grappled with a demand environment that has meaningfully softened over the last 12 months," William Blair analyst Arjun Bhatia said.
The move puts Salesforce in a good position to meet its 2026 target of 25% operating margin but the macro backdrop could pose risk to its $50 billion revenue target, Bhatia said.
"There is high likelihood of right-sizing by other software firms," RBC Capital Markets analyst Rishi Jaluria said.
Get The News You Want
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.