Economic stormclouds gather over big tech companies

Is there a tech recession? By the end of 2025 HP Inc. will employ between 4,000 and 6,000 fewer staff, the company announced yesterday. That announcement came alongside the company’s quarterly earnings statement that also showed a lower per-share earning rate than analysts had expected: between 70 and 80 cents per share, as opposed to predictions of around 86 cents.

The layoffs will come as part of a larger restructuring exercise that will cost around $1bn, split over 2023 to 2025.

HP certainly isn’t alone in its desire to lower costs. There have been many column inches covering redundancies and firings at major tech companies, notably Meta and Twitter recently, and that’s against a backdrop of hiring slowdowns from the likes of Amazon. Household names Stripe and Lyft have also announced layoffs amounting to around 13-14% of total workforce in a bid to cut costs.

The tech recession hits digital

The paradox of technology companies’ seeming ability to lift the world’s stock markets during the worldwide halting of business of the COVID epidemic and lockdowns were heralded as something of a latter-day miracle: technology was immune to pandemics being the general inference. After all, electronic networks continue to flow with the lifeblood of commerce regardless of conditions in the real world, don’t they?

But since the effects of protracted lockdowns have really begun to hit home everywhere, most of technology’s customers are feeling the pinch, and are buying less stuff and fewer services. There are reports [paywall] that large contracts between enterprises and technology vendors are being combed by procurement professionals for evidence of unused features and licenses that don’t bring immediate value to the organization. After all, if you don’t use Yammer and Teams as part of your site-wide Office 365 license, why pay for them?

At the core of the technology stack, vendors [paywall] are also slowing down hiring: Microsoft’s new hires “should be minimal” the company has said, and Alphabet – Google’s holding vessel — will hire less than half the number of people in Q4 this year than it did in Q3.

While it’s plain that an economic recession will badly affect luxuries (or rather, non-essentials) like deregulated taxi companies Lyft, social media platforms’ cutbacks are less easy to parse. The exception to that is clearly Twitter, a company where the recent exodus of staff is down to a mercurial leadership style (read, bat-sh*t crazy) and poor income figures. Meta, and therefore by proxy Facebook and Instagram are also among those laying off people and desperately cutting costs. Snapchat too lost 20% of its staff in August, suggesting that the market for short-lived pictures of cats may be contracting.

It’s not all bad news in the technology sector, however. Chinese military veterans are being asked to pitch up at Foxconn factories to fulfill demand for iPhone 14s, as reported on these pages. However, the drafting-in of a once-armed gray battalion of ex-squaddies is more to do with continued COVID restrictions working to lock out regular workers than a need to man the machines to cope with booming demand.