A city of layoffs, with stocks rising – 04/23/2023 – Marcos de Vasconcellos

Layoffs, cuts and cancellations. Those words have been all over the news about big tech companies for the last few months. This year alone, Amazon has announced 27,000 layoffs; Google, another 12 thousand; Microsoft and Meta (from Facebook), about 10,000 each.

Adding the numbers of other large companies in the sector, such as Netflix, Dell and Spotify, the year (in its almost four months) accounts for around 160,000 layoffs, according to the specialized website TechCrunch. That’s practically the entire population of Ilhéus, in Bahia, or São Caetano do Sul, in São Paulo, right down the street. And the sad truth is that this has pleased big investors. Look:

More than the impact of the advancement of artificial intelligence in its own cradle, which should be even more devastating in the coming years, we are still experiencing a “hangover” from the Covid-19 pandemic. But, unlike other sectors, which were hit by the pandemic and may now have cash short to pay the bills, techs swelled in the most critical period of the disease.

Remote work forced companies to hire new tools, such as the paid version of Zoom or the Office suite for their employees’ computers. The lack of leisure options led to a boom in streaming subscriptions, such as Netflix and Amazon Prime.

The rain of money filled the cashiers of the technology giants, which, with the high demand, began to hire and develop new products. Remember the metaverse? It was sold like the future, back when no one was allowed to leave their homes. Two years after Facebook changed its name to Meta, it feels like the future of the past.

The account was charged, with Brazilian interest, when the world returned to normality. The home office is no longer the rule. Restaurants and bars once again provided traditional entertainment. And the demand for technology has waned. Children, who had classes via computer or tablet, returned to school.

The impact was clear in the accounts of the tech giants. Netflix recorded the first loss of subscribers in its history in the first quarter of 2022. Amazon closed the year with a loss of US$ 2.7 billion (in 2021, it recorded a profit of US$ 33 billion). It is a difference of R$ 180 billion.

When the account doesn’t close, it’s because the company has bitten off more than it could chew. Enlarged the machine and forgot to match the customers. This, obviously, not counting the tragedies that also shake the markets, such as the War in Ukraine. And the increase in interest rates in the United States, which made money more expensive and made further expansion difficult.

For investors, that kind of attitude spells trouble ahead. And that was clear in the share price. From January to December of last year, shares of Amazon and Netflix fell to nearly half their price. Those at Meta plummeted 66%.

The annual balance sheets showed that the losses in the value of shares were not just something due to the financial market, but rather to the difficulty in closing accounts in the real economy. And companies have gone into “cost-cutting” mode, shedding jobs around the world.

The change in positioning hit families hard, but it pleased big investors. While laying off tens of thousands of people, companies saw their shares take off on the Stock Exchanges. This year, Meta shares rose 68%; those from Amazon, 24%; those at Microsoft, 19%; those from Google, 18%; and those from Netflix, 11%.

Does this mean the winds have changed for the tech sector? Not necessarily. It just means that companies now seem to have the right equipment to weather the storms. Investors must always be looking for growth, but it is essential to identify when it is no longer sustainable. In the end, you have to close the account.

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