The tech giants are set to report quarterly earnings starting Tuesday, along with Alphabet and Microsoft. Wall Street is hoping for good news, including more progress on artificial intelligence.
But the industry has also relied on another strategy for financial recovery: layoffs. The cuts are not as widespread as last year, when hundreds of thousands of jobs were eliminated. But they are a reminder that the tech sector is still trying to find its footing after a surge in hiring during the coronavirus pandemic and finding ways to preserve dizzying stock gains.
This year, around 100 companies have cut 25,000 posts. According to layoffs.fyi. By comparison, last year more than 1,000 companies wiped out about 260,000.
So far this month: Microsoft announced 1,900 cuts at its video game division, including recently acquired Activision Blizzard; Google laid off hundreds of employees, including in its engineering ranks and hardware division; And Amazon said it was laying off hundreds of people, including 35 percent of its workforce at its Twitch unit.
Not all layoffs are the same, The Times notes:
For big tech companies, job cuts are a way to reduce spending on non-core operations and extract the kind of cost savings that Wall Street loves. Now, those cuts are more targeted: In Meta’s case, it means reducing the number of middle managers at Instagram.
For small tech businesses, it’s a matter of survival. Start-ups are finding it difficult to raise capital due to risk-averse venture capitalists their wallets are closed, In the words of Nabeel Hayat, general partner at Spark Capital, these budding companies are “just trying to get a runway to survive.”
Cuts will likely continue for as long as investors like them. Wall Street has rewarded tech companies that laid off thousands of people with higher stock prices. Meta’s shares have soared since the start of its self-described “year of efficiency” last year, which made it its third leanest year in terms of employees. Those cost savings, along with a doubled-down bet on AI, have helped push the tech giant’s market value to more than $1 trillion.
And venture capitalists have told DealBook they’re willing to invest in start-ups — but it helps if those companies have made themselves vulnerable. Investors say this will enable them to operate better in potentially difficult times.
In other layoff news: Some tech workers are making videos of their layoffs and posting them on social media in the name of catharsis and transparency.
What’s going on over here
Boeing scaled back efforts to speed up safety approval for a version of its 737 Max jet. The aircraft manufacturer had rejected one of its applications last year Demand for exemption from safety standards For a version of its 737 Max 7. Separately, Boeing got some good news amid its latest crisis: European airlines RyanairOne of its biggest customers, said it would buy more planes if US carriers dropped their orders.
Amazon canceled its deal to buy the maker of Roomba vacuums. The move to abandon the $1.7 billion acquisition of iRobot came days after FTC officials told Amazon’s lawyers that the agency could sue to block the transaction. In November, European antitrust authorities warned that they were also opposing the takeover.
Elon Musk said that Neuralink has implanted its first device in the human brain. Musk said the product, Telepathy, would allow a person to control a phone or computer “just by thinking” and that it would initially be for “people who have lost the use of their limbs.” He said that the initial results were encouraging.
Reed Hastings donated $1.1 billion worth of Netflix shares. The co-founder of the streaming giant gave information about this His stake is 40 percent Silicon Valley Community Foundation, a California-based nonprofit group popular among tech founders. The group offers donor-advised funds, a philanthropic vehicle that can give beneficiaries both privacy and significant tax breaks.
Wall Street awaits JetBlue’s exit plan
jetblue bus reported income, predicting higher costs and flat sales. But a bigger issue looms over the airline: what plans it has for its $3.8 billion deal to buy Spirit Airlines.
A federal judge two weeks ago blocked a deal to create one of the nation’s largest carriers. Now JetBlue says it may try to back out, potentially setting up the kind of messy deal divorce drama that spooks investors.
Wall Street believes JetBlue is better off without Spirit. According to analysts at JPMorgan Chase, the blocking of the deal meant that JetBlue “dodged a bullet”. Spirit has had to grapple with poor performance and heavy debt burden.
JetBlue’s shares are up by double digits since the judge’s decision, as investors hope the airline can focus on its business in a difficult time for its industry.
But getting out will not be easy. The “drop-dead” date of the deal is July, by which time JetBlue must use its best efforts to close the transaction, including appealing the judge’s decision.
That’s unless Spirit is in breach of contract, an argument for which JetBlue is laying the groundwork: In a regulatory filing on Friday, the big airline said Spirit had “done certain things necessary to close” the deal. conditions have not been met. It’s unclear what terms Spirit potentially violated (or if JetBlue is simply trying to force an exit). For its part, Spirit says it believes there are “no grounds to terminate” the deal.
Delay will be costly. To defeat Frontier Airlines in the bidding war for Spirit, JetBlue offered a $470 million breakup payment that includes a 10-cent-per-share monthly ticking fee it has paid through January 2023.
“It’s paying huge fees every second that this thing is dragging on,” Ann Lipton, a professor of corporate governance at Tulane University, told DealBook. “The advantage of terminating now is that it can stop paying those ticking fees.”
All eyes are on the Fed again
The Fed is holding its latest two-day meeting, and interest rates are expected to remain unchanged. But investors will be looking for clues from Fed Chairman Jay Powell at his news conference on Wednesday about when the central bank might start cutting.
The strong economy is complicating the Fed’s decision. Growth is accelerating, even as rates are at their highest level in more than two decades. Investors have pegged the chances of a cut after the Fed’s meeting in March about 50-50, although many economists say late spring or early summer is more likely.
One concern: rate cuts could increase inflation, Which has reduced but has not yet reached the Fed’s 2 percent target. “Overall, we view this meeting as one where the Committee will take time to consider whether inflation is indeed on a stable path to 2 percent,” Wells Fargo economists wrote in a research note. ”
Inflation-adjusted rates are weighing heavily on the Fed’s thinking, The Times’s Jenna Smialek writes. Many experts think this really matters for the economy, especially when investors and lenders take into account the future purchasing power of the interest earned when making decisions.
The Fed is expected to proceed cautiously. Last month, Powell indicated three cuts were planned in 2024, before officials walked back his comments. If a move is likely in March, many observers expect it to send a strong signal.
But officials do not want to make cuts so quickly. “A premature rate cut could lead to an increase in demand that could put downward pressure on prices,” Atlanta Fed President Raphael Bostic said this month.
“The ship has sailed on a full return to office for most companies. They’re not going to make their place nice and go from three days to five days a week.”
—Rob Sado, CEO of Scoop Technologies, a software company that developed an index that tracks workplace strategies Why many employers have done so Quit forcing employees to stay in the office Five days a week.
Why markets aren’t panicking about the Middle East (yet)
President Biden is considering how to respond after three US soldiers were killed in Jordan in what his administration said was a drone strike by an Iran-backed militia. (Iran has denied ordering it.)
Yet markets have largely ignored concerns that turmoil in the Middle East could escalate. Why?
john authorBloomberg Opinion columnists, suggest that several factors are involved, including investors being insensitive to bad news and the belief that an all-out war will not occur in an election year.
The authors write that when it comes to assessing the Middle East the most important factor is oil:
Another reason for Wall Street’s calm is that its traders delegate the task of risk assessment to the oil market. If the price of oil doesn’t rise, the risk may not be as big, so it’s safe to stay on the stock bandwagon. ,
Oil fell sharply when trading resumed after the weekend news reassured traders in other markets that the risks were not serious. They are also, of course, against disaster. If Biden’s response is not strong enough, the US will look bad but the oil will keep flowing.
Jean Argus, chief economist at Tigres Financial Partners in New York, points out that oil is almost a binary market, and the largest supertankers do not pass through the Red Sea and the Suez Canal in any case. “Either there is oil or there is not. Anyway, it’s dangerous, it’s risky, but it’s on its way.”
French car manufacturer Renault drops plans to shut down its electric vehicle business, Ampere, citing poor IPO market conditions. (Reuters)
Job in move: jim espositoA veteran Goldman Sachs executive, the leader of its global banking and markets division, is retiring; And Tom NidesThe longtime banker and diplomat will join Blackstone as vice chairman. (WSJ)
A former IRS contractor accused of leaking tax documents to Donald Trump and others was sentenced to five years in prison. (NYT)
MLAs in Congress have threat hearing On President Biden’s plan to halt approval of exports of liquefied natural gas over concerns about climate and energy security. (Axios)
best among the rest