Tech layoffs: Is Silicon Valley headed for another dot-com bust?

SAN JOSE, Calif. (KRON) — The tech industry’s painful post-pandemic layoffs began in the summer of 2022. Since then, thousands of Silicon Valley tech employees have lost their jobs at companies including Google, Meta, Microsoft, Salesforce, Zoom, Amazon, Netflix, and Twitter.

Just last month, Google announced layoffs for 12,000 workers, or about 6% of its workforce, and Microsoft announced 10,000 job cuts, or nearly 5% of its workforce.

Globally, more than 105,000 workers lost their jobs at 364 tech companies in 2023 alone, according to Layoffs.fyi.

More major layoffs are forecast to continue in the months to come, experts say, and the possibility of a recession still looms over the horizon. Is Silicon Valley heading into another big bust like 2001’s dot-com meltdown?

Here’s the good news: 2022 and 2023’s whirlwind of tech layoffs are “far from dot-com-bust territory,” according to Market Watch.

“Longtime Silicon Valley observers and experts say this downturn is not like the dot-com bust of 2001 and 2002, because many of the companies that failed back then weren’t ‘real’ companies,” Market Watch reported.

“It’s not even close to the dot-com situation,” Tim Bajarin of Campbell-based Creative Strategies told the Mercury News. “The dot-com bust occurred because so many people believed they could produce apps that had no business models and couldn’t generate profits.”

What spurred Silicon Valley tech giants to slash their workforces over the past eight months?

In 2019, companies like Facebook, Google, and Microsoft were considered gatekeepers to jobs with cushy benefits, lucrative paychecks, and prestigious titles. But a 2020 pandemic surge in hiring, and short-term demand for tech products, threw supply out-of-sync with long-term demand, experts say.

Once the post-pandemic landscape emerged in 2022, tech CEOs realized they made costly blunders by over-hiring. Demand fueled by the pandemic’s “work from home” economy was burning out, said Jonathan Shroyer, Chief CX Innovation Officer at Arise Virtual Solutions.

“During the pandemic, there was a huge spike in demand for tech. People were in their homes, consuming more content, buying more tech gadgets for their home office and experience at home. You saw huge spikes in demand. A lot of these companies followed that demand with hiring,” Shroyer told KRON4.

“But there was no ‘new normal.’ It was a temporary state. They expected at the time that this demand and revenue was going to stay. It didn’t,” Shroyer added.

Recent waves of large layoffs are correcting over-hiring mistakes.

“It is a rebalancing of supply, demand, and consumer behavior. Sadly, these sector changes have a large cost — the cost being the impact on people and their careers,” Shroyer said.

Meta, Facebook’s parent company, was one of the worst over-hiring offenders, Shroyer said. “It’s rich for CEO’s to come out and say, ‘I’m sorry, I messed up,’ and let go of a lot of people, but ‘I’m not going to take a pay-cut,’” he said.

Since November, Meta has slashed 11,000 positions, or 13% of its workers, amid sliding stock prices. On the company’s earnings call, CEO Mark Zuckerberg said, “In aggregate, we expect to end 2023 as either roughly the same size, or even a slightly smaller organization.”

Apple is a good example of a company that made smart business and staffing decisions amid a very uncertain economy, Shroyer said.

Apple CEO Tim Cook kicked off 2023 by announcing he’s cutting his own salary. “Mr. Cook’s 2023 target total compensation is $49 million, a reduction of over 40% from his 2022 target total compensation,” Apple wrote in an SEC filing.

On top of over-hiring, other important factors further exasperated companies’ revenue struggles and magnified urgency for cutting costs. Inflation, supply chain issues, geo-political instabilities, and the strengthening of the US dollar all impact a company’s bottom line, Shroyer said.

Notable 2023 Bay Area tech layoffs

Google – Headquartered in Mountain View

Tech behemoth Google announced a six percent slash of its workforce, which would impact around 12,000 jobs. As of Jan. 31, Google parent company Alphabet’s stock price has fallen about 26 percent year over year.

PayPal – Headquartered in San Jose

PayPal announced its plans to cut seven percent of its workforce, which would impact about 2,000 people. As of Jan. 31, PayPal’s stock price has fallen about 50 percent year over year.

Salesforce – Headquartered in San Francisco

Salesforce announced a 10 percent cut to its staff, which would impact more than 7,350 employees.

In a letter to employees, CEO Mark Benioff said, “The environment remains challenging and our customers are taking a more measured approach to their purchasing decisions,” regarding the layoffs. As of Jan. 31, Salesforce’s stock price has fallen by about 24 percent year over year.

Zoom – Headquartered in San Jose

Video communications company Zoom announced it would be cutting 15 percent of its workforce impacting about 1,300 employees in a letter to its employees published on its company blog. It also said the company’s CEO Eric Yuan would be taking a 98 percent pay cut and members of executive leadership would take a 20 percent pay cut to their base salaries as well as forfeit any corporate bonuses in Fiscal Year 2023. As of Feb. 7, Zoom’s stock price has fallen about 43 percent year over year.