The Corona virus disease (Covid-19) had a magical effect on the growth of profits of technology companies in the world, as humans realized - perhaps for the first time - the importance of these companies and the services they provide. Distance learning", up to "remote work", had a crucial role in the continuation of the life and work cycle during the multiple and long closures during the pandemic that began in early 2020 and its repercussions are still continuing until now.
Everything in this world has turned into digital, and everything has become digital par excellence, and this is reflected in the profits of the major technology companies in the world that have made qualitative leaps in the volume and quality of services they provide, as well as in their profits, which have reached astronomical figures.
Astronomical profits in the time of the pandemic
For example, in 2021, the Big Five technology giants—Apple, Amazon, Google-Alphabet, Meta, and Microsoft (Microsoft) — Combined profits amounted to $1.4 trillion, the Visual Capitalist platform recently reported.
If we compare the profits of these companies in 2020 and 2021, we will find major leaps, for example, Alphabet (the parent company of Google) achieved profits that amounted to 182.5 billion dollars in 2020, to jump to 257.6 billion dollars in 2021, and Microsoft achieved profits of 143.1 billion dollars. In 2020, it will jump to $168.1 billion in 2021. As for Meta, it achieved $86 billion in profits in 2020, reaching $117.9 billion in 2021, according to a report by the Visual Capitalist platform.
Social media app Snapchat slashed sales and profit forecasts, saying it would slow hiring (Getty Images)
Every vertex has an end
It is clear that technology companies lived their golden age during the pandemic, but nothing remains the same, every peak has the beginning of a decline, and it seems clear that the year 2022 is the beginning of this decline that no one knows yet the bottom that he can reach.
From Seattle to Silicon Valley to Austin, a bleak new reality is emerging on the tech landscape.
And it is that a long era of rapid gains in sales, unlimited job growth and soaring stock prices is coming to an end.
In its place, an era of “decreasing expectations” characterized by job cuts and slowdowns, with low growth expectations and deferred expansion plans, all of which hurts employee morale, affects the industry's ability to attract talent, and has wide-ranging implications for US economic growth and innovation. According to what the writer Kurt Wagner mentioned in a lengthy report published by the "Bloomberg" platform recently.
The situation is getting worse daily against the backdrop of the economic slowdown that seems to last a long time due to the grinding war in Europe, high interest rates and inflation, and the global epidemic that is entering its third year, which is no longer a stimulus to growth as it was in the past with life returning to normal in various parts of the world. .
And just this past May, a parade of big names joined the crowd;
On May 23, social media application company Snap Inc. cut sales and profit forecasts, asserting that hiring would slow. The next day, Lyft Inc. said it would cut hiring and look for other cuts. In costs, and days later, Microsoft dispensed with hiring in several key divisions, while Instacart said it would reconsider its staffing plans, to cut costs before the planned initial public offering.
The writer confirms that the "drum beat" continued during this June;
Tesla CEO Elon Musk told his employees that the giant company will reduce its workforce by 10%, and will stop hiring operations in its branches around the world.
Cryptocurrency exchange Coinbase Global Inc said it will extend the hiring freeze and cancel a number of previously accepted job offers due to market conditions.
Wagner indicates - in his report - that pessimistic expectations were already increasing over the past period, for example, Amazon employs a huge number of workers, and owns many and very vast stores, but its business was quickly damaged due to the skyrocketing inflation in the country, while Meta Company is working It has been quietly cutting costs, while Twitter has frozen new hiring entirely and withdrew some job offers before Musk took over.
And Apple warned last April that restrictions related to the Corona virus in China would reduce revenue by about $ 8 billion during the current quarter.
Microsoft dispensed with hiring in several major departments (French)
A major shift in an industry that is no longer immune
In fact, all of this points to a major shift in an industry that only months ago seemed so fortified and powerful.
"There are no longer sure bets; there are a lot of factors working against them now," Tom Forte, a technology analyst at DA Davidson, told Bloomberg.
The Nasdaq index, which specializes in technology companies, has lost a quarter of its value since November 19, when it reached an all-time high.
The writer notes that the specter of job cuts haunts employees in Silicon Valley, who are increasingly expressing concern;
In Blind, an app that employees can use to talk about employers anonymously, discussions about the hiring freeze increased 13 times from April 19 to May 19 last year compared to the previous year, and discussions about the hiring freeze increased by 13 times. Layoffs increased by 5 times, and talk of recession increased by 50 times.
There was also widespread speculation that Meta was preparing to lay off a large number of its employees last May, which led to the massive spread of the hashtag “Metalayoff” (#metalayoff), especially on the LinkedIn platform, where Dozens of recruiters and employers have begun using the hashtag to offer alternative job opportunities, prompting Meta to stress that the company has no current plans to cut staff.
The Bloomberg report notes that what was once an engine of growth in the US economy has recently faltered, with more than 126,000 tech workers losing their jobs over the past months.
Netflix said last month that it had laid off 150 workers after losing many of its subscribers, and the streaming giant's shares have plunged 71% since mid-November.
At Meta, managers are slowing hiring in many mid- and senior positions across the company, and last April stopped hiring engineers with limited experience.
Meanwhile, Twitter employees are preparing for possible layoffs while the company awaits the arrival of new owner Elon Musk, whose bid to take over the company included cutting costs.
The company's CEO, Parag Agrawal, took a proactive step in early May, sending Twitter employees a message that the social network would begin with cuts in travel, marketing and events costs, and asking all managers to "manage your budgets tightly, prioritizing what's most important". As the writer mentioned in his report.
Perhaps the biggest shock is for companies like Meta, Twitter, and Uber, which were still relatively in their infancy the last time the tech industry was hit hard, during the 2008 financial crisis, but the difference this time is that the pandemic has boosted the extent of the pandemic. The importance and necessity of many of these tech products, which gave them some protection from the initial economic damage of the COVID-19 shutdown.
Remote work applications have had a critical role in continuing the life cycle during the multiple and long closures during the pandemic days (Shutterstock)
Companies are preparing for a long season of uncertainty
“Everyone found that technology wasn't just beautiful, it was indispensable,” Russell Hancock, CEO of Joint Venture Silicon Valley, a nonprofit organization that studies the Silicon Valley economy, told Bloomberg. “What is happening now appears to be a market correction.”
As companies prepare for a long season of uncertainty about their business, they must make tough choices about investments beyond hiring and marketing;
For example, Amazon - which in 2020 invested heavily in hiring and increasing the warehouse space it needed due to the high demand during the pandemic - finds itself in front of a huge number of warehouses and a large number of workers that it no longer needs.
The company's announcement that it had far more space than it needed alarmed hundreds of employees in its real estate division, according to a person familiar with the situation.
This person - who declined to be named - said that "employees who were previously working on multiple construction projects no longer have much to do", and their managers advised them to use extra time to focus on "learning and development", which was not reassuring at all.
Is Silicon Valley dying?
The indomitable aura may be starting to fade, but Silicon Valley is far from dying - as the writer stresses - with the California area's unemployment rate at just 2%, its lowest level since 1999, according to Joint Venture, as it found. Additional data from the Center for the Continuing Study of the California Economy reported that job growth in the region over the past year was 5.8%, faster than other national and government averages in America.