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Cloud-based software company Salesforce resorted to a layoff of a large number of employees amid harsh economic conditions.
According to inside sources, Salesforce (NYSE: CRM) recently completed a layoff that affected hundreds of employees, necessitated by waning sales performance. The American cloud-based software company stated that it took this decision after demand weakened in some countries and industries. According to Salesforce’s head of finance, Amy Weaver, there was a slowdown in demand among small and medium-sized businesses. Weaver further pointed out that this slowdown was prevalent, especially in North America and Europe. In addition, the Salesforce finance chief also stated that demand tapered in other segments, including communications, consumer goods, media, and retail.
Details on Layoff
A prior report on the Salesforce layoff predicted that as many as 2,500 employees would face termination. However, one person familiar with the situation put the number of staff let go by the company at under 1,000.
Commenting on the Salesforce layoff, a company spokesperson explained:
“Our sales performance process drives accountability. Unfortunately, that can lead to some leaving the business, and we support them through their transition.”
Salesforce reportedly had a headcount of 73,541 people at the end of January this year. By August, the enterprise software developer stated in a filing that its workforce had risen 36% in the past year. According to the San Francisco-based company, this increase was necessary to tackle increasing customer demand for services. However, that same month, Salesforce also provided lower full-year earnings and revenue guidance than expected. This lower guidance came despite the company’s reported earnings and revenue that surpassed analysts’ estimations at the time. Explaining the August guidance for fiscal 2023, co-founder and co-CEO Marc Benioff, explained:
“Sales cycles can get stretched, deals are inspected by higher levels of management and all of this we began to start to see in July. Nearly everyone I’ve talked to is taking a more measured approach to their business. We expect these trends to continue in the near term, and we’ve reflected this in our guidance.”
Following Benioff’s comments, Salesforce’s shares dipped 3% the following day.
Salesforce Layoff Indicative of Harsh Times for Tech Companies
The Salesforce layoff comes at a challenging time for the tech space, which is also feeling the brunt of rising prices and interest rates. Several tech companies have pruned their workforce in a bid to remain competitive and profitable amid a slowing economy. Furthermore, as economic recession talks increase, several tech firms plan to hire employees at a relatively slower rate.
A chief Salesforce business software rival, Microsoft (NASDAQ: MSFT), confirmed its own round of job cuts last month. A spokesperson for the tech giant and PC maker cited slowing revenue on waning product sales. However, despite the downsizing, the Microsoft spokesperson also suggested that the company will keep on hiring in key growth areas. In addition, the company intends to keep evaluating its business priorities regularly in order to make “structural adjustments accordingly”.