Salesforce to cut workforce by 10% after hiring 'too many people'

 

Amid the economic downturn, Salesforce Inc is planning to cut 10% of its jobs as the company hires 'a lot of people' to meet its high demand for the service.

Salesforce Inc said it plans to cut jobs by up to 10% and close some offices, with a bloated workforce amid an economic downturn following a rapid pandemic hiring spree.

The cloud-based software firm said on Wednesday that job cuts will take a charge of about $1.4 billion to $2.1 billion, while accounting for about $800 million to $1 billion in the fourth quarter.

Companies from Meta Platforms Inc to Amazon.com Inc have cut thousands of jobs over the past year, in preparation for an expected recession as a result of aggressive interest rate hikes by global central banks to curb inflation.

Businesses that depended on cloud services during the pandemic are now trying to cut spending and delay new projects, hurting companies such as Salesforce and Microsoft Corp.

"The environment remains challenging and our customers are taking a more restrained approach to their purchasing decisions," Marc Benioff, Salesforce co-CEO, said in a letter to employees.

“As our revenue has grown exponentially through the pandemic, we have hired a lot of people who are facing this economic downturn, and I take responsibility for that.”

Salesforce had about 80,000 employees at the end of the third quarter, up from about 70,000 a year earlier.

The company said in its quarterly regulatory filing that it increased headcount "to meet higher demand for services."


Shares of Salesforce were up 3% on Wednesday. They lost nearly half their value in 2022 as Salesforce posted four consecutive quarters of slow growth.

"It (the company) is certainly not alone as the sector continues to struggle with a demand environment that has softened meaningfully over the past 12 months," said William Blair analyst Arjun Bhatia.

Bhatia said the move puts Salesforce in a good position to meet its 25% operating margin target by 2026, but the macro backdrop could pose a risk to its $50 billion revenue target.

"There is a high potential for right-sizing by other software firms," said Rishi Jaluria, analyst at RBC Capital Markets.