US tech giant Amazon is feeling the pinch from the slowing economy.
Staff working on its consumer products will pay the price, after the company this week confirmed it will cut an unspecified number of jobs at its Devices and Services arm. The announcement followed rumours on Monday that Amazon plans to lay off around 10,000 employees in various corporate and technology roles. Unnamed sources cited by Reuters reiterated on Thursday that 10,000 is still the target.
“As you know, we continue to face an unusual and uncertain macroeconomic environment. In light of this, we’ve been working over the last few months to further prioritise what matters most to our customers and the business,” explained Dave Limp, SVP of Devices and Services at Amazon, in a blog post on Wednesday. “After a deep set of reviews, we recently decided to consolidate some teams and programmes. One of the consequences of these decisions is that some roles will no longer be required. It pains me to have to deliver this news as we know we will lose talented Amazonians from the Devices and Services org as a result.”
At the same time, he insisted that Devices and Services “remains an important area of investment for Amazon”.
Amazon’s job-cutting plan comes just over a week after Facebook parent Meta said it will axe more than 11,000 workers. CEO Mark Zuckerberg admitted to mistakenly believing that the surge in ecommerce sales and working from home wrought by Covid lockdowns marked a permanent shift in consumer behaviour. It turns out though, that people actually enjoy leaving the house, paying someone else to make their coffee, and interacting with their friends and colleagues face-to-face. This error of judgement, coupled with growing concern over Zuck’s expensive bet on the metaverse, have contributed to Meta’s market value plunging by $700 billion in just one year.
That Amazon has announced its first round of layoffs at Devices and Services suggests that it too might have got carried away during the pandemic, capitalising on consumers’ clamour for products and content that made life at home less tedious. Now that people have stocked up on a sufficient quantity of Alexas, Kindles, Fire TV sticks and so-on, their appetite for shiny new toys has ebbed away to the extent that Amazon likely needs to downsize again.
Then there’s the economy. As our recent round-up of the smartphone market highlights, economic headwinds – including inflation, weaker national currencies, Russia’s invasion of Ukraine – are contributing to a general erosion of consumer confidence. The result is, people prioritise buying food and heating over discretionary spending on gadgets.
This week’s announcement is just the latest contribution by Amazon to the tech sector’s current malaise. In late October, it published a set of Q3 financials that didn’t exactly inspire confidence, and its outlook for this quarter fell well short of expectations. That came a couple of days after Microsoft warned it expects growth at its Azure cloud division to fall in Q4.
Meanwhile, Elon Musk’s chaotic stewardship of Twitter is not exactly doing wonders for peoples’ confidence in tech. After culling senior management and gutting the company, The Washington Post reported this week that Musk has issued an ultimatum to staff, asking them to commit to long hours and intense pressure, or leave the company with three months of severance pay. There is a risk that the bedlam at Twitter – and the subsequent damage it has inflicted on Musk’s credibility – could become a cause for concern at his other businesses.
Between the steady stream of negative news coming from the tech sector, and the questionable decisions of some of its most high-profile ‘stable geniuses’, the outlook is beginning to look decidedly bleak.
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