Meta cuts its workforce by 11,000 as it pumps more money into the metaverse
Nov 9 (Reuters) – Meta Platforms Inc (META.O) said on Wednesday it would cut more than 11,000 jobs, or 13% of its workforce, in one of the biggest layoffs of the year as the company Facebook’s parent is battling soaring costs from its push into the metaverse in a weak ad market.
The massive layoffs, the first in Meta’s 18-year history, follow thousands of job cuts at other big tech companies, including Twitter and Microsoft Corp
The pandemic-driven boom that boosted tech companies and their valuations has turned into a slump this year in the face of decades-high inflation and rapidly rising interest rates.
“Not only has e-commerce returned to earlier trends, but the macroeconomic slowdown, increased competition and loss of advertising signal has caused our revenue to decline from what I expected,” the director said. General Mark Zuckerberg in a message to employees.
“I was wrong, and I take responsibility for it.”
The company also plans to cut discretionary spending and extend its hiring freeze through the first quarter. But he did not specify the regions affected or the expected cost savings from the moves.
It now forecasts spending of up to $100 billion in 2023, up from up to $100 billion previously, with more resources focused on areas like artificial intelligence, ads, commerce platforms and the metaverse.
EXPENSIVE METAVERSE BET
Wall Street is losing patience with Zuckerberg’s huge and experimental bets on his proposed metaverse, a shared virtual world, a shareholder who recently called the investments “super-sized and terrifying”.
Concerns over the spending spree have wiped out more than two-thirds of Meta’s market value so far this year. But its shares rose 4.5% to $100.80 before the bell on Wednesday.
“The market is breathing a sigh of relief that either Meta or Zuckerberg management seem to be specifically heeding some advice, which is that you need to mitigate some of the growing spending bill,” said Hargreaves Lansdown analyst Sophie Lund-Yates. .
She added, however, that “it doesn’t quite align with the fact that you’re going to be trying to increase efficiency while pursuing something as ambitious and tenuous as the Metaverse.”
Meta will pay 16 weeks of base salary and two additional weeks for each year of service, plus any remaining paid time off as part of the severance package, the company said.
Affected employees will also receive their shares that were due to vest on Nov. 15 and medical coverage for six months, according to Meta.
The company did not disclose the exact amount of the layoffs, but said the figure was included in its previously announced spending forecast for 2022 of between $85 billion and $87 billion.
Meta had 87,314 employees at the end of September.
Reporting by Aditya Soni, Nivedita Balu and Eva Mathews in Bengaluru; Editing by Shounak Dasgupta
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