Facebook is planning to begin large-scale layoffs this week that will affect thousands of employees with an announcement planned as early as Wednesday.
Facebook parent company Meta Platforms Inc forecast a weak holiday quarter and significantly more costs next year wiping about $67 billion off Meta’s stock market value, adding to the more than half a trillion dollars in value already lost this year.
The disappointing outlook comes as Meta is contending with slowing global economic growth, competition from TikTok, privacy changes from Apple, concerns about massive spending on the metaverse and the ever-present threat of regulation.
The impending layoffs were first reported in the Wall Street Journal.
Chief Executive Mark Zuckerberg has said he expects the metaverse investments to take about a decade to bear fruit.
In the meantime, he has had to freeze hiring, shutter projects and reorganize teams to trim costs.
“In 2023, we’re going to focus our investments on a small number of high priority growth areas. So that means some teams will grow meaningfully, but most other teams will stay flat or shrink over the next year. In aggregate, we expect to end 2023 as either roughly the same size, or even a slightly smaller organization than we are today’ Zuckerberg said on the last earnings call in late October.
The social media company had in June cut plans to hire engineers by at least 30%, with Zuckerberg warning employees to brace for an economic downturn.
Meta’s shareholder Altimeter Capital Management in an open letter to Mark Zuckerberg had previously said the company needs to streamline by cutting jobs and capital expenditure, adding that Meta has lost investor confidence as it ramped up spending and pivoted to the metaverse.
Altimeter said annual free cash flow can be doubled to $40billion if Zuckerberg cuts 17,000 jobs, trimmed capital expenditure by at least $5billion to $25billion a year and capped annual investment in the Metaverse to $5billion instead of the current $10billion.
‘Meta needs to re-build confidence with investors, employees and the tech community in order to attract, inspire, and retain the best people in the world,’ Altimeter CEO Brad Gerstner wrote in the letter. ‘In short, Meta needs to get fit and focused.’
Several technology companies, including Microsoft, Twitter and Snap have cut jobs and scaled back hiring in recent months as global economic growth slows due to higher interest rates, rising inflation and an energy crisis in Europe.
Meta has spent billions and hired thousands of employees around the world to build the Metaverse, which refers to a shared digital environment that uses augmented or virtual reality technology to make it feel more realistic.
But the company’s dreams have fallen short as the Reality Labs unit, which works on augmented and virtual reality, has continuously reported staggering losses. It lost $5.8billion in the first six months of the year.
Altimeter said such huge investments ‘in an unknown future is super-sized and terrifying, even by Silicon Valley standards’.