(Photo Illustration by Mateusz Slodkowski/SOPA Images/LightRocket via Getty Images)
Key takeaways
- LinkedIn cuts 700 roles and shuts down Chinese app, Intel is gearing up for potentially thousands of job losses and Novavax sheds 25% of its workforce
- Microsoft and Intel stock dipped, but Novavax share price soared 35% at the news
- Layoffs likely aren’t over yet as the uncertain economic outlook persists
Thought we’d be seeing the end of layoffs soon? Unfortunately, it’s far from the case. It’s been another difficult week for the tech industry as jobs and career social platform LinkedIn, computer chip specialists Intel and biotech company Novavax have all announced a reduction in headcounts.
The layoffs are all at least in the hundreds, and cite difficult economic times as the reason. Wall Street wasn’t impressed with LinkedIn’s parent company or Intel, but the job cuts have saved Novavax’s bacon. Here’s what’s gone down and the market reaction.
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What’s the latest layoffs news?
Work social media platform LinkedIn has announced it’s axing over 700 roles and shutting down its Chinese app InCareer. The cuts account for 3.5% of LinkedIn’s total headcount. InCareer only launched in China in 2021, but LinkedIn cites strong competition and macroeconomic headwinds for its premature demise.
LinkedIn’s earnings report was otherwise positive, reporting an 8% revenue growth year-on-year to $3.7 billion. CEO Ryan Roslansky said the layoffs were a hard decision but LinkedIn “must continuously have the conviction to adapt our strategy in order to make our vision a reality”.
Chip manufacturer Intel has also confirmed it’ll be laying off staff but declined to say how many. It’s thought the job cuts could be up to 20% of the client computing and data center divisions. Intel has allegedly also begun cutting roles in its R&D division, with 500 roles gone from its California hub, while its Oregon workforce has also been impacted.
Intel is looking to make a whopping $10 billion in savings by 2026 after announcing the largest quarterly loss in its history, with revenue down 36% year-on-year after a slump in personal computer sales. Amid fierce competition from the likes of AMD and Nvidia, Intel is banking on chip demand will grow for the rest of the year.
Biotech business Novavax is making big cuts to its total workforce, slashing what’s reckoned to be around 400 jobs – a quarter of Novavax employees. It also plans to consolidate operations and cut costs, including reducing R&D spending and slashing its administrative budget. CEO John Jacobs said the job losses were a difficult decision but a “necessary one to put the company on a better pathway towards financial strength and sustainability”.
The move comes after a difficult time for the vaccine producer, which for Q4 raised alarm bells when the company admitted it wasn’t sure how it would stay afloat. Novavax now forecasts 2023 sales to hit $1.4 billion to $1.6 billion, according to its Q1 earnings report.
Are any other companies making layoffs?
Layoffs.fyi, the website with the unfortunate role of tracking tech layoffs globally currently stands at 192,000 jobs lost in the sector across 661 companies for this year alone. Given it’s only May, that’s a pretty huge number.
Last week ecommerce platform Shopify said it was reducing its headcount by 20%, with what’s thought to be 2,300 roles impacted. It’s the second major layoffs round that Shopify has made in 12 months; the reason for the job cuts was said to be partly thanks to Shopify disposing of its logistics arm to Flexport.
Texas-based Sabre, a travel industry software company, said it would be slashing 15% of jobs in a bid to save $200 million annually. 1100 employees are affected. Instead, it will focus on tech investment and entering new markets in a bid to hit double-digit annual revenue growth by 2024.
The market reaction
LinkedIn’s parent company Microsoft’s share price was flat at the announcement and on Tuesday morning was down 0.53%. It’s possible for Microsoft stock, cost-cutting layoffs aren’t as impactful anymore as AI announcements in 2023. Microsoft itself made mass layoffs numbering roughly 10,000 roles earlier this year.
As for Intel, it hasn’t been a fun ride for the stock thanks to its dismal sales. As of Tuesday, it’s down 2.18% and has slid over 7.4% this month. The stock drop may also be down to Intel’s decision on shareholder dividends, paying out $1.5 billion despite the heavy losses it’s taken.
Investors were clearly relieved to hear Novavax was on a brighter path again, with the stock price jumping 35% in a day. This is partly due to the layoffs but also because the biotech company unveiled some promising new vaccine data for Covid and the flu that should secure the company’s future in the medium term.
What’s driving mass layoffs in tech is a continuously uncertain economic environment thanks to what’s turning out to be a drawn-out battle against inflation. Investors are now running scared that more rate rises are coming after New York Fed president John Williams commented “We haven’t said we are done raising rates” earlier this week.
As analysts eagerly await the CPI and PPI data this week for clues on whether the Fed’s interest rate crusade is working, tech companies continue to feel the pinch as sales decline – and the result is sadly catastrophic for the tech jobs market.
The bottom line
Tech layoffs have been a grim running theme of the economic news this year and last. While we’d like to see the economy magically fix itself, inflation to get in check and interest rates come down again, there’s no magic wand that can make that happen.
All things considered, we’re not done with layoffs just yet as tech companies grapple with the macroeconomic situation. From an investing perspective, whether the cuts positively affect the stock market depends on the situation, but it’s less likely as there is less fat to trim each time.
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