Layoffs for focus and higher profitability

Alphabet became the latest of the major technology companies to announce layoffs of ca 12,000 employees (or about 6 % of total staff). This followed Microsoft’s announcement of cuts of 10,000 employees earlier this week.

The situation of the very profitable technology majors are very different from the situations of unprofitable startups and scaleups doing cuts of 20-30 %.

It is not about getting to profitability, but increasing profit margins and optimizing how capital and talent are used in very large companies (100,000+ employees each). The goal is increased share valuation (for external shareholders and employees via restricted stock units programs), not securing corporate survival in the short-term.

Author: Henrik Torstensson

Partner at Alliance VC. Investing in Nordic early-stage tech startups.

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