After Twitter and Meta laid off thousands of employees within days, Salesforce, the largest supplier in the world sales and management software company, announced today (November 9) that it is also cutting hundreds of jobs amid slowing revenue growth for its small and midsize customers. It’s a sign that the economy could be in worse shape than the jobs data suggests.
Layoffs at tech companies have been in the headlines in recent months. But so far, rapid job cuts in Silicon Valley, which makes up a tiny sliver of the U.S. labor market, have largely staggered with the rest of the economywhere the unemployment rate remains at historic lows and job vacancies at record highs.
But the spread of layoffs to companies like Salesforce indicates that companies are not only cutting ad spend, as Google and Meta’s falling revenue shows, but also limiting investment in digital infrastructure. Technology and sales are usually the last areas where companies cut their budgets during times of economic uncertainty, according to a July survey over 200 CFOs by market research firm Gartner.
“These cuts may indicate that macroeconomic headwinds may be stronger than expected,” investment bank Jefferies said of the Salesforce layoffs this week in a note to clients today.
The planned layoff will affect workers with “performance issues” and will likely take place before the Thanksgiving holiday, Protocol first reported November 8. “Our sales performance process promotes accountability. Unfortunately, this may lead to some leaving the company, and we support them through their transition,” the company said in a statement.
Aggressive hiring, followed by layoffs
Salesforce employed about 78,000 people in February, according to the Company Website. Like many tech companies, it has been hiring aggressively during the pandemic. In an August filing with the Securities and Exchange Commission, Salesforce said it has increased its workforce by 36% over the past year to meet increased demand for its products.
Salesforce sells cloud-based software designed to help businesses manage marketing campaigns, sales, and customer service. Its enterprise applications are used by more than 150,000 small and large businesses worldwide, about 60% of which are located in the United States, according to its website.
However, in its latest quarterly report, Salesforce warned earnings and revenue this year would likely be lower than previous estimates. Demand was slowing among small and medium-sized business customers, particularly in North America and Europe in the communications, consumer goods, media and retail sectors, Amy Weaver, chief financial officer of Salesforce, said during a call with analysts in August.
Bret Taylor, co-CEO of Salesforce, said on the same call that executives at some of his client companies are scrutinizing software purchases more carefully, which lengthens the time it takes to close a sale.
Salesforce’s main competitor in enterprise software, Germany’s SAP, has frozen hiring for the rest of the year, but has avoided a massive layoff so far. Another major software competitor, Microsoft, laid off a few hundred employees in July and announcement additional job cuts in October.
Salesforce stock is down 44% this year, compared to the 22% decline in the S&P 500. It currently has a market capitalization of $142 billion.