Leaders at Big Tech companies are dropping massive “moonshot” projects to cut costs.
An article in the New York Times, “The Perils of Working on a CEO’s Pet Project,” highlights a current pivot in Big Tech. Typically, when a CEO’s big bet project fizzles, workers just go to another role at the company, and the business absorbs the bad idea. But as companies currently look for budget cuts, employees involved in projects that could take years to make a profit have found themselves among the mass layoffs.
For example, “At Amazon, the ax fell on teams working on the Alexa voice system, drones and automated stores, all projects championed by Amazon’s founder, Jeff Bezos, who no longer runs the company,” according to the Times. “At Google, it hit ventures like autonomous trucks and other so-called moonshots once championed by Larry Page and Sergey Brin, who also no longer run their company.”
I asked Wedbush Securities analyst Dan Ives, who covers tech, for his assessment. “What’s happening right now is—the clock struck midnight for hypergrowth in Big Tech,” Ives tells me.
Prior to this, “they’ve spent money like 1980s rock stars,” he says. Hiring increased during a “hypergrowth phase” over the past decade, Ives says. “It’s led to a rip the Band-Aid off moment, where a lot of the moonshot or next-gen projects could easily get cut,” he says. “And now these CEOs are having to make tough decisions that they haven’t had to make since the financial crisis in 2009.”
But is eliminating teams of highly skilled professionals a good move for a company in the long run? A recent Mercer report advises that if you do reduce headcount, it’s important to “decouple skills from jobs.” This means that even if unneeded roles are eliminated, employees with critical skills are retained and redeployed to different areas.
I asked Ives his thought on that approach. “The headcount cuts that are happening across the board in Big Tech are on more legacy areas or less strategic areas,” Ives says. “Those employees could get moved around from one division to another. But I think what you’re seeing in these massive layoffs is a prioritization of resources that’s happening across the tech space.”
Big Tech companies combined have almost a trillion dollars on the balance sheet, Ives says. “So, there are significant resources that are going to be allocated to drive the next cycle,” he says. For example, “Apple and Amazon are now laser-focused on where they’re spending,” he explains. “But from Apple’s AR [augmented reality] and VR [virtual reality] to Amazon’s build out of cloud, as well as artificial intelligence capabilities, that’s not going to stop.”
“I think there’s the fourth industrial revolution that’s playing out among tech around A.I., ChatGPT, electric vehicles, and cloud,” Ives says. “Spending in next-gen areas is going to actually accelerate in this Game of Thrones battle that’s going on between tech.”
And in this Game of Thrones, tech talent may take more caution in deciding whether to jump to their CEO’s pet project.
According to S&P Global Market Intelligence data, venture capital investments worldwide fell 64.7% in February to $17 billion from $48.22 billion a year prior. The number of funding rounds with venture capital participation was down by almost half (44%) to 1,150 rounds from 2,056 rounds in February 2022, the research found. The total amount raised also declined from $19.46 billion in January via 1,197 rounds.
“Making Sense of Stock Buybacks,” an opinion piece in Wharton’s business journal by Wharton finance professor Michael R. Roberts, examines some of the arguments against stock buybacks. But Roberts also explains why buybacks are an important method for returning money to investors and avoiding unprofitable investments.
Warren Jenson was named CFO at Nielsen, an information, data, and market measurement firm, effective April 15. Jenson replaces Linda Zukauckas, who left the company last month. As CFO, Jenson will work closely with the leaders of Nielsen’s three business units—Audience Measurement, Gracenote, and Analytics Portfolio—supporting their strategic initiatives. He brings over 34 years of experience. Jenson has served as CFO for several Fortune 500 companies including Amazon, Delta Airlines, NBC, and Electronic Arts, and most recently served as president, CFO, and executive managing director of international for LiveRamp.
Jay Golonka was named CFO at NetSPI, a cybersecurity company. Golonka brings over 25 years of experience to the role. Previously, he was the CFO at private equity-backed software company Prometheus Group. During his time there, he led them through nine acquisitions. Golonka spent 18 years in public accounting and had finance leadership positions at two other high-growth software companies before joining Prometheus Group. Over his career, he has worked with organizations as they navigate the public company environment, including organizations going through the formal IPO process.
“The worse thing for policymakers to do is to dismiss Tuesday’s market volatility as noise. The more this undue volatility occurs, the greater the risk of economic and market accidents—that is a recession caused by what is now three Fed policy mistakes in the past two years and strain to orderly financial market functioning.”
—Mohamed El-Erian, president of Queens’ College at the University of Cambridge and former chief economic advisor for Allianz SE, writes in a Bloomberg opinion piece. El-Erian discusses how remarks by Federal Reserve Chair Jerome Powell during a Senate panel on Tuesday fueled volatility in markets. Powell indicated that robust economic data such as a blowout January jobs report could mean “the ultimate level of interest rates is likely to be higher than previously anticipated,” Fortune reported.
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