Meta's big job cuts aren't about the tricky economy or rising inflation. They're about Mark Zuckerberg's mistakes.
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- Meta laid off 10,000 staff on Wednesday, adding to its November job cuts.
- CEO Mark Zuckerberg said it was economic changes that led to over 21,000 in total being laid off.
- Investors have long said that Zuckerberg's own decisions and mistakes led to this point.
Meta CEO Mark Zuckerberg sent a letter to staff announcing a second round of layoffs on Tuesday, just months after its last round of big job cuts.
The memo said that 10,000 more workers would be let go, in addition to the 11,000 that were handed a pink slip starting in November. What's more, 5,000 open roles would be closed, showing just how serious the company is about slimming down their workforce and reducing operating costs overall.
In the note, also shared on Facebook, Zuckerberg blamed the most recent state of the economy: "Last year was a humbling wake-up call. The world economy changed, competitive pressures grew, and our growth slowed considerably." He continued: "Higher interest rates lead to the economy running leaner, more geopolitical instability leads to more volatility, and increased regulation leads to slower growth and increased costs of innovation."
But investors had been asking Meta to have that "humbling wake-up call" for a while — as early as the second quarter of 2022, when Wall Street noticed the social networking giant's revenue was shrinking even as its employee headcount continued to rise.
Last October, two weeks before reports surfaced that Meta was cutting jobs, shareholder Altimeter Capital's CEO Brad Gerstner penned an open letter to the social network giant requesting that it reduce headcount by 20% and cut back on overall spending, including its multi-billion dollar investments in the metaverse.
Zuckerberg has bet his company's future on the metaverse, including its expensive bets on virtual reality goggles via its Reality Labs unit. But those efforts have yet to materialize into actual revenue for the company, even as it spends billions on research and development. Investors have begun calling for Zuckerberg to hedge those bets.
"Like many other companies in a zero rate world — Meta has drifted into the land of excess — too many people, too many ideas, too little urgency," wrote Gerstner last year.
Meta's stock has moved up after every layoff announcement, a sign that investors liked the announcements. Last November, after suffering a price drop following its disappointing third quarter earnings where profits slid 52% year-over-year on declining revenue and metaverse expenses, causing Meta's stock to fall more than 20%, news of layoffs put a pep back in investors' step as the stock price rose 6%.
Evercore head of internet research Mark Mahaney said in a note to investors that Meta and Zuckerberg seemed to have heard the "negative investor reaction to perceived lack of cost discipline" during its third-quarter earnings results because they are pivoting in a less costly direction.
Investors had a positive response on Wednesday as Meta's stock rose 6% again off the news of more layoffs. And the fact that Meta's Reality Labs are included in this most recent round of layoffs is apparently music to some investors' ears, according to an AllianceBernstein investor note by tech specialist Mark Schilsky.
"That's very important for a lot of reluctant shareholders who have shied away from Meta's stock because they didn't feel comfortable underwriting the risk that Zuckerberg was going to spend an ever increasing amount of money on the Metaverse," he wrote.