Salesforce cuts 10% of staff in layoffs as boss Marc Benioff holds his hands up for ‘hiring too many people’

 Salesforce i
s cutting 10% of its personnel and reducing some office space as part of a restructuring plan, the company announced Wednesday. The company employed more than 79,000 workers as of December.

In a letter to employees, co-CEO Marc Benioff said customers have been more “measured” in their purchasing decisions given the challenging macroeconomic environment, which led Salesforce to make the “very difficult decision” to lay off workers.

“I’ve been thinking a lot about how we came to this moment,” he said. “As our revenue accelerated through the pandemic, we hired too many people leading into this economic downturn we’re now facing, and I take responsibility for that.”

Shares of Salesforce were up nearly 3% on Wednesday.

The cuts mark the latest round of departures at the cloud-based software company, the largest private employer in San Francisco. The company let go fewer than 1,000 employees in November. Later that month, Bret Taylor announced his plan to step down as co-CEO on Jan. 31, leaving Marc Benioff alone again at the top of the company he co-founded in 1999.

In the three trading days after the Taylor news landed alongside Salesforce’s third-quarter earnings report, the stock had two of its three worst days of 2022, plunging 8.3% and 7.4%, respectively. 

Days later, the company announced the departure of Slack CEO Stewart Butterfield, who joined Salesforce as part of its biggest acquisition ever.

Salesforce hired aggressively during the pandemic. At the end of January 2022, it employed 73,541 people. It said in a December filing that its headcount had risen 32% since October 2021 “to meet the higher demand for services from our customers.”

Now, like many other major tech companies, Salesforce is looking to cut costs as it contends with slowing revenue growth and a weakening economy. Days after Twitter’s new boss, Elon Musk, slashed half his company’s workforce, Facebook parent Meta announced its most significant round of layoffs ever, eliminating 13% of its staff. Amazon, Lyft, HP, and DoorDash also announced significant cuts to their workforces.

Salesforce said it expects its employee restructuring to be complete by the end of fiscal 2024, and its real estate restructuring to be complete by fiscal 2026.

General Motors Co (GM.N) on Wednesday posted a 2.5% rise in U.S. new vehicle sales in 2022, outselling Japan's Toyota Motor Corp (7203.T), aided by an easing of inventory shortages and strong demand for its cars and trucks.

The U.S. automaker said its 2022 sales rose to 2,274,088 vehicles, beating Toyota's annual sales of 2,108,458 units in the country.

Toyota has been among those hit acutely by parts shortages, which forced the automaker to cut its full-year production target in November. Sales of its SUVs, a key segment, fell 8.6% in 2022.

Industry-wide full-year U.S. auto sales are forecast to be about 13.9 million units, down 8% from 2021 and 20% from the peak in 2016, according to industry consultant Cox Automotive.

Inventory shortages, caused by surging material costs and persistent chip shortages, spilled into 2022, hobbling production at many automakers. Tight supplies kept car and truck prices elevated, even as auto inventory improved in the second half of the year.

Demand for employment remained high in November as companies looked for workers to fill positions despite worries of a looming recession, the Labor Department reported Wednesday.

The Job Openings and Labor Turnover Survey for the month showed available positions at 10.46 million, down just fractionally from October’s total and above the 10 million forecasts by FactSet. The JOLTS survey is closely watched by Federal Reserve officials for signs of labor market slack.

As a share of the labor force, job openings remained at 6.4%, indicating demand for workers is still high despite the Fed’s efforts to cool the economy and bring down inflation, which has been driven partially by rising wages.

A separate data point Wednesday showed that the U.S. manufacturing sector contracted for the second consecutive month. The ISM Manufacturing Index for December came in at 48.4%, representing the percentage of companies showing expansion. That was about in line with the 48.5% estimate from Dow Jones. A reading below 50% indicates contraction.

On the jobs front, the JOLTS report showed a slight decrease in hiring and a bit of an increase in layoffs. However, the report had little indication of substantial labor market softening.

The quits level increased by 126,000, which took the rate up one-tenth of a percentage point to 2.7%, for a reading that is indicative of worker confidence that they can leave their jobs and find other employment.

Open positions outnumbered available workers by about 1.7 to 1.

The ISM report also showed that the labor market for the manufacturing sector is solid. The jobs index component of the reading rose 3 points to 51.4. At the same time, the prices index, a gauge of inflation, declined to 39.4, a drop of 3.6 points.

Markets will be watching later in the week for the Labor Department’s nonfarm payrolls report, which is expected to show a gain of 200,000 jobs.

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