After Big Tech grew in unprecedented and unchecked fashion for a decade, building ostentatious palaces to house growing workforces while plying them luxuriant freebies to keep them from defecting to rivals, is the wild ride over?
Tech’s largest companies, as well as their smaller competitors, are looking to cut back as they face a litany of headaches: Billions of dollars in unused commercial real estate; supply-chain and cost issues; evaporating funding; a 21% drop in global M&A activity in the first half of the year to $2.2 trillion, according to new data from Refinitiv; an all-but-shut window on IPOs; wage inflation; talent retention.
The chief executives of Meta Platforms Inc. META, -1.88% and Alphabet Inc.’s GOOGL, -0.97% GOOG, -0.75% Google have warned employees of tough times ahead — with Mark Zuckerberg telling employees on the last day of the second quarter that the company faced one of the “worst downturns that we’ve seen in recent history” —and Microsoft Corp. MSFT, -0.97% is slowing hiring in some groups and eliminating a few jobs. Even the world’s most valuable company, Apple Inc., AAPL, -0.97% reportedly plans to scale back hiring and spending, after profligate spender Amazon.com Inc. AMZN, -1.26% signaled cutbacks earlier this year. Other high-flying tech players in recent years, such as Netflix Inc. NFLX, -1.14%, Snap Inc. SNAP, 0.05% and Lyft Inc. LYFT, -2.18% are making similar or more drastic moves, and many startups are in much worse shape.
All of these are signs of vexing changes coming to the industry after a boom during the first two years of the pandemic, when tech companies indulged in a frenzy of hiring and spending and allowed some employees cushy work-from-home schedules. But inflation, supply-chain woes, the war in Ukraine and the prospects of recession could impede what venture-capital legend Bill Gurley called a “Disney-esque set of experiences/expectations in high tech companies.”
The perfect storm of economic calamity has led one legendary executive to predict nothing short of a “bloodbath in the tech market” for the next one to three years that could dramatically change the culture and business structure of companies in Silicon Valley and beyond for the foreseeable future.
“It’s going to be a lot of pain, and a lot of people will get hurt,” C3.ai Inc. AI, -0.62% CEO Tom Siebel told MarketWatch. “We had this SPAC, NFT, crypto craziness. The days of everyone making lots of money, working at home in pajamas, being paid in bitcoin, that’s over.
“Before this is over, there will be lots of empty commercial real-estate buildings like we saw in 2000-’01 in Silicon Valley,” Siebel added. “Not as many, but a lot.”
Employees are especially feeling the pinch. A recent LinkedIn poll revealed 60% of respondents were either worried or very worried about their careers because of economic uncertainty.
Source: MarketWatch
