Salesforce Inc (CRM.N) said it prepares to lay off staff by 10% and close some offices, after rapid pandemic hiring left it with a bloated workforce amid an economic downturn.
The cloud-based software firm said on Wednesday the layoffs would result in about $1.4 billion to $2.1 billion in charges, while only about $800 million to $1 billion will be registered in the fourth quarter.
Companies from Amazon.com Inc (AMZN.O) to Meta Platforms Inc (META.O) have cut thousands of jobs in 2022, in preparation for a recession, awaited because of aggressive interest rate rises by global central banks to control inflation.
Businesses that depended on cloud services during the pandemic are now attempting to cut expenses and are shelving new projects, affecting companies such as Salesforce and Microsoft Corp (MSFT.O).
“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 almost 80,000 employees at the end of the third quarter, a rise from about 70,000 the previous year. The firm said in its quarterly regulatory filing that it hired more staff “to meet the higher demand for services”.Buy Crypto Now
Its shares rose about 3% on Wednesday. They shed nearly half their value last year as Salesforce reported four successive quarters of slowing growth. William Blair analyst Arjun Bhatia said:
“It (the company) is certainly not alone as the sector has grappled with a demanding environment that has meaningfully softened over the last 12 months.”
The move puts Salesforce in a better position to reach its 2026 target of 25% operating margin but the macro backdrop could present a risk to its $50 billion revenue target, Bhatia said.
“There is a high likelihood of right-sizing by other software firms,” RBC Capital Markets analyst Rishi Jaluria said.