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Tech layoffs are hitting companies that are doing just fine

Satya Nadella
Microsoft CEO Satya Nadella recorded an 8% bump in revenue but opted to cut roles in its gaming division.JASON REDMOND/AFP via Getty Images
  • Tech workers have had to learn a hard lesson: Layoffs can happen at companies that are fine, too.

  • Companies such as Grammarly and Microsoft have laid people off in 2024 despite healthy finances.

  • Their decisions have been about getting resources focused on their most pressing goals.

This layoff season has taught tech workers a tough lesson: They can still lose their jobs even if their company is doing fine.

The latest example of this came last week as the typing assistant Grammarly — last valued at $13 billion — announced it would cut about 230 roles as part of a "business restructuring."

Rahul Roy-Chowdhury, who was appointed Grammarly CEO last year, made it clear the cuts were "not a cost-cutting exercise." In a memo to staff, Roy-Chowdhury insisted that the company's "financial position is, and remains, strong."

Instead, he said the layoffs had been conducted as a means of recalibrating resources for “the AI-enabled workplace of the future.”

For Grammarly, a business that offers users writing assistance, that means adjusting to a new age of artificial-intelligence chatbots and personal agents that could act as competitors.

Layoffs, then, were an unfortunate consequence of that adjustment.

“As we strengthen our focus toward driving the AI-enabled workplace and deepen our technical investments in AI, we will need a different mix of capabilities and skillsets,” Roy-Chowdhury told employees.

“We also need to redesign our organization to improve the quality and speed of collaboration — and that means, among other things, restructuring roles and co-locating certain teams.”

The Grammarly cuts serve as a reminder that employees aren't just at risk of losing their jobs at businesses burning through cash.

Grammarly isn't alone in this approach. Since the start of the year, 141 tech companies have made layoffs affecting 34,250 workers, according to the online tracker Layoffs.fyi. For context, this year's batch of layoffs still pales in comparison to last year, when almost 140,000 had lost their jobs by February.

That was a time when many startups and Big Tech players were seeking to correct the excessive hiring made over the pandemic and curb spending in a high-inflation environment. Many at the time, such as Meta, had hugely loss-making divisions to worry about.

In many instances, the smaller scale of the layoffs hitting tech companies this year reflects how much of the decision-making process this time around is more about fine-tuning.

Discord CEO Jason Citron, for instance, told employees last month that a lot of its hiring in recent years — hiring that increased its head count five times over since 2020 — had resulted in an organization that was “less efficient,” leading to the decision to lay off 17% of staff.

As The Verge reported, the decision to correct the inefficiencies was made despite the company seeming to not be in “dire financial straits.” In other words, the company, last valued at $15 billion, grew but at a faster pace than it needed to. That in no way means it’s in bad shape.

The trend may be even clearer when looking at one of tech’s big winners of the last year.

Last month, days before Microsoft reported a record $62 billion in revenue for the final quarter of 2023, the tech giant cut 1,900 roles from its Activision Blizzard and Xbox divisions.

This is a company that’s doing anything but struggling right now, with its bet on OpenAI, the launch of the AI Copilot tool and strong demand for cloud computing helping it grow. It made layoffs, nonetheless.

Read the original article on Business Insider