Linkedin | Brad Porter | Layoff | Economy downturn

Linkedin | Brad Porter | Layoff | Economy downturn 

Here is the link. 

 I call BS on the subtle blame shifting going on in these CEO memos announcing layoffs. I’ve found many of these to be truthful statements, but also a little disengenous.

For instance, yes Amazon Stores had a tough quarter/year last year, but Amazon separates ad sales from Stores revenue, but you’re not going to sell those ads without the store. Combined those businesses are doing well.

Let’s take Sundar Pichai, CEO of Google, today announcing a 12,000 person layoff…

“I take full responsibility for the decisions that led us here.

Over the past two years we've seen periods of dramatic growth. To match and fuel that growth, we hired for a different economic reality than the one we face today.”

The first sentence says he takes full responsibility. The second paragraph subtly shifts it to the “different economic reality.” Smart CEOs and CFOs do scenario planning. I suspect they kept hired in 2022 knowing that inflation was high and fed was going to tighten and slow the economy, confident they could still afford those investments.

Why do I think they could afford the hiring they did? If we generously assume the average Googler who was let go had a fully loaded cost of $500K/year (which would be almost double typical benchmarks), this layoff saves them $6B/year or $1.5B/quarter. In Q3 2022 alone, Google made $17.3B in profit.

Did a new economic reality require this painful cut? If you think $17.3B in quarterly profit isn’t good enough, then yes. Clearly the market does as Google stock is up 4%.

But was Google leadership blind-sided by the economy and is their business in duress? We’ll find out more on Feb 2nd when they announce earnings, but I suspect they’re still going to announce a healthy 10-figure profit.

Happy for commenters to tell me my math or analysis is off and I’ll retract, but otherwise, let’s stop blaming the economy for causing very healthy businesses that knew what they were doing when they hired, to now need to cut. Instead, let’s just acknowledge the market is rewarding these cuts, making them seem like the right choice for shareholders.