Salesforce Co-CEO Marc Benioff announced in a Wednesday letter to employees that the company, which develops business software solutions for customer relationship management and marketing automation, has witnessed clients take a more “measured approach” to purchasing decisions, necessitating the dismissal of some 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,” Benioff remarked, adding, “I’m grateful for every single one of you who has contributed to our continued success as a company, and the hard work and sacrifices you have made to generate success for our hundreds of thousands of customers.”
Employees impacted by the layoffs were told they would receive emails within one hour of the letter and will receive five months of pay and health insurance. Shares for Salesforce increased more than 3% on Wednesday; the company’s stock price declined more than 40% last year.
Salesforce exceeded analyst forecasts in its most recent earnings report, which indicated that revenues had reached $7.8 billion, reflecting a 14% increase since the same period in the previous year. Stock prices dropped at the time, however, due to a sudden departure announcement from Salesforce Co-CEO Bret Taylor.
The dismissals occur as technology firms batten the hatches in the expectation that the economy will continue to be throttled by inflationary pressures, supply chain bottlenecks, geopolitical volatility, and efforts from the Federal Reserve to suppress rising prices. Companies dismissed more than 90,000 workers last year, according to a report from CrunchBase, which included both small ventures and established firms such as Amazon, Microsoft, and Tesla.
Some investors have criticized technology companies for rapidly expanding payrolls, calling for a reduction in headcount to match dismal market forecasts. Altimeter Capital Management CEO Brad Gerstner said in a letter to Meta CEO Mark Zuckerberg that the platform, which more than tripled its headcount over the past four years, should dismiss workers to reduce costs.
Elon Musk, who recently took control of rival social media company Twitter, has meanwhile garnered attention in Silicon Valley for dismissing two-thirds of employees with minimal impact on the site’s performance. “The fact that Twitter is running well with headcount down significantly really matters,” Atreides Management Chief Investment Officer Gavin Baker said, noting that many executives begrudgingly admire the billionaire entrepreneur. “We will start to hear ‘lighter is faster’ and references to small teams being superior to large teams.”
Baker compared “summer” and “winter” executives, arguing that more are transitioning to the latter category after the actions taken by Musk in a boon for venture funds. “They are going to drive margins and do more with less,” he continued. “Their companies will be more likely to succeed and their employees will do better.”
The layoffs occurred during one of the worst years for the stock market in modern history. The S&P 500 index plummeted nearly 20% last year, rivaling the 37% decline witnessed in 2008 amid the collapse of the banking system, as well as the 12% and 22% declines witnessed in 2001 and 2002 amid the dot-com bubble. Last year was also one of the few on record in which both the stock market and the bond market were negative.