Zoom Video Communications Inc. (NASDAQ: ZM) surged in early session on Wednesday as it plans to cut about 1,300 jobs as demand for the company’s video conferencing services declines with the end of the pandemic, and to take a $68 million charge as a result.
The company’s shares, which fell 63% last year amid a rout in technology stocks, closed 9.9% higher on the news but were marginally lower in extended trading. While announcing the layoffs, which will affect nearly 15% of the company’s workforce, CEO Eric Yuan stated that he would take a 98% pay cut for the coming fiscal year and forego his bonus.
“We worked extremely hard… but we also made mistakes. We did not devote as much time as we should have to thoroughly analyzing our teams or determining whether we were growing sustainably and in accordance with our highest priorities “Yuan stated.
According to a regulatory filing on Tuesday, Zoom will incur charges ranging from $50 million to $68 million as a result of the layoffs. The majority of it, according to the company, will be spent in the first quarter of fiscal 2024. The company’s revenue growth has slowed after it became a household name during lockdowns due to the popularity of its video-conferencing tools.
“I would say incrementally, this is telling us we shouldn’t expect revenue reacceleration in the near term, but we could see additional upside to margins for a company that is already profitable,” RBC Capital Markets analyst Rishi Jaluria said.
Zoom increased hiring during the pandemic to meet surging demand, but it is now joining U.S. companies in cutting costs to prepare for a possible recession.
This year, companies ranging from Goldman Sachs Group Inc to Alphabet Inc have laid off thousands of workers in order to weather a demand downturn caused by high inflation and rising interest rates.
In addition, the video conferencing software company announced that its executive leadership team will reduce their base salary by 20% during the same time period. Yuan stated that departing employees will receive 16 weeks of pay, healthcare coverage, and a year-end bonus.
