layoffs
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As IBM shifts to hybrid cloud, reports have them laying off 10,000 in EU
As IBM makes a broad shift in strategy, Bloomberg reported this morning that the company would be cutting around 10,000 jobs in Europe. This comes on the heels of last month’s announcement that the organization will be spinning out its infrastructure services business next year. While IBM wouldn’t confirm the layoffs, a spokesperson suggested there were broad structural changes ahead for the company as it concentrates fully on a hybrid cloud approach.
IBM had this to say in response to a request for comment on the Bloomberg report: “Our staffing decisions are made to provide the best support to our customers in adopting an open hybrid cloud platform and AI capabilities. We also continue to make significant investments in training and skills development for IBMers to best meet the needs of our customers.”
Unfortunately, that means basically if you don’t have the currently required skill set, chances are you might not fit with the new version of IBM. IBM CEO Arvind Krishna alluded to the changing environment in an interview with Jon Fortt at the CNBC Evolve Summit earlier this month when he said:
The Red Hat acquisition gave us the technology base on which to build a hybrid cloud technology platform based on open-source, and based on giving choice to our clients as they embark on this journey. With the success of that acquisition now giving us the fuel, we can then take the next step, and the larger step, of taking the managed infrastructure services out. So the rest of the company can be absolutely focused on hybrid cloud and artificial intelligence.
The story has always been the same around IBM layoffs, that as they make the transition to a new model, it requires eliminating positions that don’t fit into the new vision, and today’s report is apparently no different, says Holger Mueller, an analyst at Constellation Research.
“IBM is in the biggest transformation of the company’s history as it moves from services to software and specialized hardware with Quantum. That requires a different mix of skills in its employee base and the repercussions of that manifest itself in the layoffs that IBM has been doing, mostly quietly, for the last 5+ years,” he said.
None of this is easy for the people involved. It’s never a good time to lose your job, but the timing of this one feels worse. In the middle of a recession brought on by COVID, and as a second wave of the virus sweeps over Europe, it’s particularly difficult.
We have reported on a number of IBM layoffs over the last five years. In May, it confirmed layoffs, but wouldn’t confirm numbers. In 2015, we reported on a 12,000 employee layoff.
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Salesforce announces 12,000 new jobs in the next year just weeks after laying off 1,000
In a case of bizarre timing, Salesforce announced it was laying off 1,000 employees at the end of last month just a day after announcing a monster quarter with over $5 billion in revenue, putting the company on a $20 billion revenue run rate for the first time. The juxtaposition was hard to miss.
Earlier today, Salesforce CEO and co-founder Marc Benioff announced in a tweet that the company would be hiring 4,000 new employees in the next six months, and 12,000 in the next year. While it seems like a mixed message, it’s probably more about reallocating resources to areas where they are needed more.
Salesforce will add 4K jobs over the next 6 mos & 12K over the next year. Join our 54K employee strong Ohana defining the future of software. Salesforce is the worlds fastest growing Top 5 enterprise software company. jobs@salesforce.com @salesforcejobs https://t.co/ffzlmeHhCz
— Marc Benioff (@Benioff) September 18, 2020
While Salesforce wouldn’t comment further on the hirings, the company has obviously been doing well in spite of the pandemic, which has had an impact on customers. In the prior quarter, the company forecasted that it would have slower revenue growth due to giving some customers facing hard times with economic downturn time to pay their bills.
That’s why it was surprising when the CRM giant announced its earnings in August and that it had done so well in spite of all that. While the company was laying off those 1,000 people, it did indicate it would give those employees 60 days to find other positions in the company. With these new jobs, assuming they are positions the laid-off employees are qualified for, they could have a variety of positions from which to choose.
The company had 54,000 employees when it announced the layoffs, which accounted for 1.9% of the workforce. If it ends up adding the 12,000 news jobs in the next year, that would put the company at approximately 65,000 employees by this time next year.
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Salesforce confirms it’s laying off around 1,000 people in spite of monster quarter
In what felt like strange timing, Salesforce has confirmed a report in yesterday’s Wall Street Journal that it was laying off around 1,000 people, or approximately 1.9% of the company’s 54,000 strong workforce. This news came in spite of the company reporting a monster quarter on Tuesday, in which it passed $5 billion in quarterly revenue for the first time.
In fact, Wall Street was so thrilled with Salesforce’s results, the company’s stock closed up an astonishing 26% yesterday, adding great wealth to the company’s coffers. It seemed hard to reconcile such amazing financial success with this news.
Yet it was actually something that president and chief financial officer Mark Hawkins telegraphed in Tuesday’s earnings call with industry analysts, although he didn’t come right and use the L (layoff) word. Instead he couched that impending change as a reallocation of resources.
And he talked about strategically shifting investments over the next 12-24 months. “This means we’ll be redirecting some of our resources to fuel growth in areas that are no longer as aligned with the business priority will be now deemphasized,” Hawkins said in the call.
This is precisely how a Salesforce spokesperson put it when asked by TechCrunch to confirm the story. “We’re reallocating resources to position the company for continued growth. This includes continuing to hire and redirecting some employees to fuel our strategic areas, and eliminating some positions that no longer map to our business priorities. For affected employees, we are helping them find the next step in their careers, whether within our company or a new opportunity,” the spokesperson said.
It’s worth noting that earlier this year, Salesforce CEO Marc Benioff pledged there would be no significant layoffs for 90 days.
Salesforce is pledging to its workforce Ohana not to conduct any significant lay offs over the next 90 days. We will continue to pay our hourly workers while our offices are closed. We encourage our Ohana to pay their own personal hourly workers like housekeepers & dog walkers.
— Marc Benioff (@Benioff) March 25, 2020
The 90-day period has long since passed and the company has decided the time is right to make some adjustments to the workforce.
It’s worth contrasting this with the pledge that ServiceNow CEO Bill McDermott made a few weeks after the Benioff tweet, promising not to lay off a single employee for the rest of this year, while also pledging to hire 1,000 people worldwide the remainder of this year, while bringing in 360 summer interns.
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Benchmark-backed Optimizely confirms it has laid off 15% of staff
Optimizely, a San Francisco-based startup that popularized the concept of A/B testing, has laid off 15% of its staff, the company confirmed in a statement to TechCrunch. The layoff impacts around 60 people, and those laid off were given varied levels of severance. Each employee was given six months of COBRA and was allowed to keep their laptops.
“As with so many other businesses globally, Optimizely has been impacted by COVID-19. Today, we have had to make a heartbreaking decision to reduce the size of our workforce,” Erin Flynn, chief people office, wrote in a statement to TechCrunch, adding that “today’s difficult decision sets up our business for continued success.”
The startup was founded in 2009 by Dan Siroker and Pete Koomen on the idea that it helps to have customers experience different versions of the website, also known as A/B testing, to see what iteration sticks best. A year after founding, the startup went through Y Combinator and in 2013 it signed a lease for a 56,000-square-foot office in San Francisco.
Optimizely last raised $50 million in Series D financing from Goldman Sachs, bringing its total venture capital secured to date to $200 million. Other investors include Index Ventures, Andreessen Horowitz and GV.
In June, Optimizely said it handles more than 6 billion events a day. Customers include Visa, BBC, IBM, The Wall Street Journal, Gap, StubHub and Metromile.
Optimizely was not listed as applying for a PPP loan, a program created by the government to help businesses avoid laying off staff. The loans were met with controversy in Silicon Valley, as some thought venture-backed businesses should turn to investors, instead of the government, for extra capital.
Optimizely’s layoffs are somewhat surprising, given recent earnings reports that show that enterprise SaaS companies have broadly benefited from the coronavirus pandemic. In an online work world, infrastructure and software services become more vital by the day. Box, for example, helps people manage content in the cloud and it beat expectations on adjusted profit and revenue. So why is Optimizely struggling?
There are a ton of reasons for layoffs beyond what the market thinks about a business. Optimzely’s customers are a mix of heavy-hitters in enterprise, but also include businesses that have struggled during this pandemic, including StubHub and Metromile — both of which had layoffs.
While the pace of layoffs is slowing down, cuts themselves aren’t disappearing. As the stocks show us, it’s a volatile time and businesses are looking for ways to stay financially safe.
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Who really benefits from reskilling?
Nearly 40 million Americans are unemployed, and a recent study that examined more than 66,000 tech job layoffs found that sales and customer success roles are most vulnerable amid COVID-19. In response, some quarters of Silicon Valley are abuzz about a long-standing technology: reskilling, or training individuals to adopt an entirely new skillset or career for employment.
As millions look for a way to reenter the workforce, the question arises: Who really benefits from reskilling technology?
That depends on how you look at it, said Jomayra Herrera, a senior associate at Cowboy Ventures. Reskilling for a well-networked manager looks a lot different than it does for someone who doesn’t have as much leverage, and the vast majority of people fall into the latter. Not everyone has a friend at Google or Twitter to help them skip the online application and get right to the decision-makers.
Beyond the accessibility offered by live online classes, she pointed to the difference between assets and opportunities.
“You can give someone access to something, but it’s not true access unless they have the tools and structure to really engage with it,” Herrera said. In other words, how useful is content around reskilling if the company doesn’t support job placement post-training.
Herrera said companies must give individuals opportunities to test skills with real work and navigate the career path. Her mother, who did not go to college and speaks English as a second language, is looking to pursue training online. Before she can proceed, however, she has to surmount hurdles like language support, resume creation, job search and other challenges.
All of a sudden, content feels like a commodity, regardless of if it has active and social learning components. It’s part of the reason that MOOCs (massive open online courses) feel so stale.
Udacity, for example, was almost out of cash in 2018 and laid off more than half of its team in the past two years, according to The New York Times. Now, like other edtech companies, it is facing surges in usage.
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IBM confirms layoffs are happening, but won’t provide details
IBM confirmed reports from overnight that it is conducting layoffs, but wouldn’t provide details related to location, departments or number of employees involved. The company framed it in terms of replacing people with more needed skills as it tries to regroup under new CEO Arvind Krishna.
“IBM’s work in a highly competitive marketplace requires flexibility to constantly remix to high-value skills, and our workforce decisions are made in the long-term interests of our business,” an IBM spokesperson told TechCrunch.
Patrick Moorhead, principal analyst at Moor Insights & Strategy, says he’s hearing the layoffs are hitting across the business. “I’m hearing it’s a balancing act between business units. IBM is moving as many resources as it can to the cloud. Essentially, you lay off some of the people without the skills you need and who can’t be re-educated and you bring in people with certain skill sets. So not a net reduction in headcount,” Moorhead said.
It’s worth noting that IBM used a similar argument back in 2015 when it reportedly had layoffs. While there is no official number, Bloomberg is reporting that today’s number is in the thousands.
Holger Mueller, an analyst at Constellation Research, says that IBM is in a tough spot. “The bets of the past have not paid off. IBM Cloud as IaaS is gone, Watson did not deliver and Blockchain is too slow to keep thousands of consultants occupied,” he said.
Mueller adds that the company could also be feeling the impact of having workers at home instead of in the field. “Enterprises do not know and have not learnt how to do large software projects remotely. […] And for now enterprises are slowing down on projects as they are busy with reopening plans,” he said.
The news comes against the backdrop of companies large and small laying off large numbers of employees as the pandemic takes its toll on the workforce. IBM was probably due for a workforce reduction, regardless of the current macro situation, as Krishna tries to right the financial ship.
The company has struggled in recent years, and with the acquisition of Red Hat for $34 billion in 2018, it is hoping to find its way as a more open hybrid cloud option. It apparently wants to focus on skills that can help them get there.
The company indicated that it would continue to subsidize medical expenses for laid off employees through June 2021, so there is that.
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Manufacturing startup Divergent 3D reduces staff by one-third
Divergent, the Los Angeles-based startup aiming to revolutionize vehicle manufacturing, has cut about one-third of its staff amid the COVID-19 pandemic that has upended startups and major corporations alike.
The company, which employed about 160 people, laid off 57 workers, according to documents filed with the California Employment Development Department. Founder and CEO Kevin Czinger didn’t provide specific numbers. However, he did confirm to TechCrunch that he had to reduce staff due to the COVID-19 pandemic. A core team remains, he said.
“Whenever you’re doing something that’s affecting people’s jobs — and especially in a company where I basically recruited everyone and knew everyone by face and name — it’s obviously super painful to do that under any circumstance,” Czinger said in an interview this week.
The company’s No. 1 priority was to ensure long-term financial stability and secure the core team, technology development and customer programs no matter what the scenario, Czinger said, adding that there is still enormous uncertainty surrounding the real impact and duration of the COVID-19 pandemic.
“This was about making the company as totally weatherproof as possible,” Czinger said.
Divergent 3D is essentially a Tier 1 supplier for the automotive and aerospace industry. But it can hardly be considered a traditional supplier. After resigning as CEO of the now-defunct EV startup Coda Automotive in 2010, Czinger began to focus on how the vehicle manufacturing process could become more efficient and less wasteful.
Divergent 3D was born out of that initial exploration. The company developed an additive manufacturing platform designed to make it easier and faster to design and build new cars at a fraction of the cost — all while reducing the environmental impact that traditional factories have.
The platform is an end-to-end digital production system that uses high-speed 3D printers to make complex parts out of metal alloys. This system produces the structures of vehicles, such as the full frame, subframes and suspension structures that are part of the crash-performance structure of the vehicle.
In its early years as a company, Divergent 3D was perhaps best known for Blade, the first automobile to use 3D printing to form the body and chassis. Divergent 3D made Blade — which was on the auto show circuit in 2016 — to demonstrate the technology platform.
It was enough to get the attention of investors and at least two global OEMs as customers. Divergent can’t name the customers because of non-disclosure agreements.
The company has raised about $150 million from investors that include venture capital fund Horizons Ventures, automotive and aerospace engineering services company Altran Technologies and Chinese backers O Luxe Holdings, an investment conglomerate backed by the Hong Kong-based real estate investment magnate Li Ka-shing and Shanghai Alliance Investment Limited, an investment arm of the Shanghai Municipal Government.
The latest example of Divergent’s technology is the 21C, a hypercar unveiled in March that was built using the additive manufacturing platform. The high-performance 3D-printed vehicle was produced by Czinger Vehicles. Divergent 3D and Czinger Vehicles are wholly owned subsidiaries under Divergent Technologies.
Image Credits: Czinger Vehicles
Czinger said the company is poised to navigate the pandemic and ultimately survive. Divergent 3D has two global OEMs as customers. Structures such as chassis components and subframes, for which Divergent has supply contracts, are going through various testing and validation stages, depending on the program. Those programs, which are for serial production vehicles, are moving forward, Czinger said.
There will be delays as automakers have slowed or stopped operations. Czinger is hopeful that by 2021 the company will be able to announce that its 3D-printed structures will be production vehicles.
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Sales startup People.ai lays off 18% of staff, raises debt round amid COVID-19 uncertainty
Another startup has turned to downsizing and fund raising to help weather the uncertainty around the economy amid the global coronavirus health pandemic. People.ai, a predictive sales startup backed by Andreessen Horowitz, Iconic, Lightspeed and other investors and last year valued at around $500 million, has laid off around 30 people, working out to about 18% of staff, TechCrunch has learned and confirmed.
Alongside that, the company has quietly raised a debt round in the “tens of millions of dollars” to make strategic investments in new products and potentially other moves.
Oleg Rogynskyy, the founder and CEO, said the layoffs were made not because business has slowed down, but to help the company shore up for whatever may lie ahead.
“We still have several years of runway with what we’ve raised,” he noted (it has raised just under $100 million in equity to date). “But no one knows the length of the downturn, so we wanted to make sure we could sustain the business through it.”
Specifically, the company is reducing its international footprint — big European customers that it already has on its books will now be handled from its U.S. offices rather than local outposts — and it is narrowing its scope to focus more on the core verticals that make up the majority of its current customer base.
He gave as an example the financial sector. “We create huge value for financial services industry but have moved the functionality for them out to next year so that we can focus on our currently served industries,” he said.
People.ai’s software tracks the full scope of communication touch points between sales teams and customers, supposedly negating the tedious manual process of activity logging for SDRs. The company’s machine learning tech is also meant to generate the average best way to close a deal — educating customer success teams about where salespeople may be deviating from a proven strategy.
People.ai is one of a number of well-funded tech startups that is making hard choices on business strategy, costs and staffing in the current climate.
Layoffs.fyi, which has been tallying those losing their jobs in the tech industry in the wake of the coronavirus (it’s based primarily on public reports with a view to providing lists of people for hire), says that as of today, there have been nearly 25,000 people laid off from 258 tech startups and other companies. With companies like Opendoor laying off some 600 people earlier this week, the numbers are ratcheting up quickly: just seven days ago, the number was just over 16,000.
In that context, People.ai cutting 30 may be a smaller increment in the bigger picture (even if for the individuals impacted, it’s just as harsh of an outcome). But it also underscores one of the key business themes of the moment.
Some businesses are getting directly hit by the pandemic — for example, house sales and transportation have all but halted, leaving companies in those categories scrambling to figure out how to get through the coming weeks and months and prepare for a potentially long haul of life and consumer and business behavior not looking like it did before January.
But other businesses, like People.ai, which provides predictive sales tools to help salespeople do their jobs better, is (for now at least) falling into that category of IT still in demand, perhaps even more than ever in a shrinking economy. In People.ai’s case, software to help salespeople have better sales conversations and ultimately conversions at a time when many customers might not be as quick to buy things is an idea that sells right now (so to speak).
Rogynskyy noted that more than 90% of customers that are up for renewal this quarter have either renewed or expanded their contracts, and it has been adding new large customers in recent weeks and months.
The company has also just closed a round of debt funding in the “tens of millions” of dollars to use for strategic investments.
It’s not disclosing the lender right now, but it opted for debt in part because it still has most of its most recent round — $60 million raised in May 2019 led by Iconic — in the bank. Although investors would have been willing to invest in another equity round, given that the company is in a healthy position right now, Rogynskyy said he preferred the debt option to have the money without the dilution that equity rounds bring.
The money will be used for strategic purposes and considering how to develop the product in the current climate. For example, with most people now working from home, and that looking to be a new kind of “normal” in office life (if not all the time, at least more of the time), that presents a new opportunity to develop products tailored for these remote workers.
There have been some M&A moves in tech in the last couple of weeks, and from what we understand People.ai has been approached as well as a possible buyer, target and partner. All of that for now is not something the company is considering, Rogynskyy said. “We’re focused on our own future growth and health and making sure we are here for a long time.”
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Unicorn layoffs keep piling up as the economy gets worse
Earlier today a grip of new data presented a sharply negative picture of the American economy. And this afternoon, news broke that a trio of well-known, heavily-backed unicorns were cutting staff.
With stocks down as well, we’ve received negative signals from the private market, the public market and the economy as a whole in the same day. Let’s take a minute to set the macro stage, and then go over the latest cuts from Carta (first reported by Bloomberg), Zume (Business Insider broke that particular story) and Opendoor (via The Information).
Economic malaise
The backdrop for today’s cuts is a faltering American economy. A glance at recent news is sufficient. In the last few hours, home builder confidence recorded the “biggest drop in history,” while retail sales fell 8.7% in March, what CNBC noted was “the most ever in government data,” and CNN Business reported that American factories’ output fell 5.4% in March, “their steepest one-month slowdown since 1946.”
It’s perhaps no surprise, then, that we’ve seen unicorn layoffs all year. In January the news was Vision Fund-backed companies cutting burn to skate closer to profitability. Then, the first round of COVID-19-forced staff cuts landed at big companies; firms like Bird and TripActions slashed staff as their companies were rent by a slowdown in their core operations by the pandemic and its related economic and social changes.
Slimmer cuts at smaller companies have happened on a nearly chronic basis, something that TechCrunch has covered, as well.
Today, however, saw three cuts from three unicorns (private companies worth $1 billion or more) that have long been objects of TechCrunch’s attention. So, let’s talk about them briefly:
- Opendoor, a San Francisco-based home sales-focused startup with backing from SoftBank, announced deep cuts to its staffing today. In a statement provided to TechCrunch, the company’s CEO Eric Wu said that 35% of its employee base would be eliminated to “ensure that we can continue to deliver on our mission.” The CEO also said that exiting staff would get paid for eight weeks and “reimbursement of 16 weeks of health insurance coverage.” Wu is also donating his 2020 salary to a fund to support staff. Opendoor was most recently valued at $3.8 billion in a $300 million funding round announced last March.
- Carta, a San Francisco-based private company equity service platform, announced cuts worth 16% of its staff, or 161 roles, according to a memo that the company shared publicly. Previously eShares, Carta has grown from a provider of equity management for small private companies into a larger, broader service and software play supporting yet-private firms. Carta most recently raised $300 million at a $1.7 billion valuation last May.
- And finally, Zume. Zume didn’t respond to a request for comment by the time of publication and did not post a public note that we could find. Still, Business Insider reports that the company is cutting 200 more staff after earlier 2020 personnel reductions. The firm will be left with around 100 employees, working on compostable boxes. Zume last raised $375 million at a valuation of just under $1.9 billion (post-money) in November 2018.
It’s getting hard to keep track of all the cuts. Heck, I helped break Modsy layoffs recently with TechCrunch’s Natasha Mascarenhas, and we were first to the BounceX cuts as well. It’s a rough, bad economy, and it’s harming growth-oriented companies that like startup unicorns.
More when we have it, probably sooner than we’d like to report.
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Instagram rival VSCO lays off 30% of staff to reduce reliance on outside capital
VSCO, the popular photo editing app and Instagram rival, is the latest company to undergo layoffs attributed to the COVID-19 crisis, which has put a strain on venture-backed startups. According to a report from NPR, which was then confirmed by VSCO co-founder and CEO Joel Flory on LinkedIn, the company is laying off around 30% of staff, or 45 of its employees.
Though Flory didn’t reference the COVID-19 outbreak by name, his post described the rapid change to the economy which necessitated the layoffs.
“2020 was staged to be a year where we would continue to forward invest into our business,” Flory wrote. “Overnight our environment changed. We realized that we would need to shift towards running a self-sustaining business.”
In other words, VSCO is anticipating a future where venture capital is less readily available and is making the shift toward running a business that’s no longer reliant on outside capital or funding in order to operate. By laying off a portion of staff, VSCO believes it will be able to sustain its business for many years.
To date, VSCO has raised $90 million in outside funding, and sees its app used by more than 20 million active users per week. However, a smaller portion of those users are customers who pay for a VSCO Membership that offers an expanded array of features, tools, presets and other content. VSCO confirmed to TechCrunch in February 2020 that it had around 2+ million paid subscribers.
Late last year, VSCO had said it was on pace to surpass 4 million paid subscribers by 2020 and was approaching $80 million in annual revenue. However, these projections were tied to VSCO’s forward investment this year, and the shift towards becoming self-sustainable will impact these numbers, the company says.
PitchBook data valued the business at $550 million, NPR also reported — a number that’s made the rounds before, as well.
In 2020, VSCO has rolled out several features designed to better support video editing. It gave creators the ability to publish their video edits to the VSCO feed, and last month, for example, launched a more powerful and feature-rich video editing tool called Montage. The latter was meant to grow VSCO’s paid subscriber base, as it requires users to pay in order to save and publish their finished videos.
VSCO’s profile has also been raised beyond its core user base in recent months, after it became associated with a Gen Z meme that circulated on sites like TikTok.
Though perhaps not the marketing the company would have desired, the VSCO girl meme became a way to mock a certain type of girl — one who sports a messy bun, baggy shirts and scrunchies and carries around eco-conscious items like Hydro Flasks or metal straws. VSCO’s app for making your photos look good became associated with this persona, as it’s often used to filter and edit images in order to give them an aesthetic that teenage girls (VSCO girls) supposedly desired.
As for the layoffs, VSCO says its former employees will receive a minimum of seven weeks of severance pay, and a minimum of two months of COBRA health coverage. In terms of equity, VSCO is pro-rating stock option vesting and extending equity exercise periods post-term, it also notes.
Flory’s LinkedIn post additionally offered a way for those interested in hiring the laid-off VSCO employees to reach the company. He said the jobs@vsco.co email address could be used to make inquires about hiring its talent. The company will also be working to provide other job placement resources and support, it says.
“I am deeply saddened to let some incredible people go and am so grateful for everything they’ve done for VSCO and our community,” Flory wrote. “Our mission and vision remain unchanged. Our ability to provide a place for creative expression, inspiration and connection is even more important than ever right now,” he added.
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