It's a dark year for technology.
The horizon also looks dark.
The clouds continue to gather over the sector, which has seen exceptional expansion during the two years of the covid-19 pandemic. The industry is deeply impacted as the world's central banks fight inflation, which is at its highest level in 40 years.
After leaving interest rates at almost zero, the Federal Reserve has been increasing them since March to fight the high prices of goods and services, which have reduced consumers' purchasing power.
Many economists and business leaders say this monetary policy is likely to cause a so-called hard landing in the economy, a recession. These fears are prompting companies to delay investment, while households postpone discretionary purchases -- such as tech gadgets.
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'The Elimination of Thousands of Job'
For Mark Zuckerberg and his company Facebook, now known as Meta Platforms (META), the year 2022 is a long and unending nightmare.
Last June, the chief executive officer warned that the economy is headed for "one of the worst downturns that we've seen in recent history."
As a result, Meta will embark on an unprecedented austerity cure. The Menlo Park, Calif.-based group will announce massive job cuts this week that could number in the thousands, the Wall Street Journal reports, citing unnamed sources.
The company, which employs 87,314 people as of Sept. 30, up 28% year-over-year, could make the announcement on Nov. 9, the day after the midterm elections.
Contacted by TheStreet, Meta neither confirmed nor denied the information from the WSJ.
Dave Arnold, a spokesperson, referred TheStreet to Zuckerberg's comments during the third quarter earnings' call.
"In 2023, we're going to focus our investments on a small number of high priority growth areas. So that means some teams will grow meaningfully, but most other teams will stay flat or shrink over the next year," the boss told analysts on Oct. 26.
"In aggregate, we expect to end 2023 as either roughly the same size, or even a slightly smaller organization than we are today," he added.
Meta isn't the only tech group to deliver bad news. Apple (AAPL) has just warned consumers that they will have to wait longer for the new iPhone 14, because of covid-19 restrictions in China, which have disrupted production in a giant factory of its supplier Foxconn.
Amazon (AMZN) halted corporate hiring after freezing recruitment in the retail division and withdrawing 10,000 job offers. Microsoft (MSFT), Lyft (LYFT), Stripe, Coinbase (COIN) and others have already announced job cuts, while Alphabet (GOOGL) will slow the pace of hiring.
Meta has been preparing investors for these drastic cost reductions for several weeks now. Zuckerberg on on Sept. 30 warned employees that the firm "grew quickly."
Are Things Getting Worse?
To cope with the new reality, Meta will freeze hiring, restructure some teams and reduce budgets even for teams in growth sectors. The company won't, for example, replace departures, and will part ways with people "who aren't succeeding," Zuckerberg said.
"I had hoped the economy would have more clearly stabilized by now," Zuckerberg said. "But from what we're seeing, it doesn't yet seem like it has, so we want to plan somewhat conservatively."
He added that Meta will be "somewhat smaller" by the end of 2023.
"For the first 18 years of the company, we basically grew quickly basically every year, and then more recently our revenue has been flat to slightly down for the first time."
Massive job cuts suggest things are getting worse.
The economic slowdown and a probable recession threaten the revenue Meta generates from its bread-and-butter Facebook advertising business. But the owner of Instagram and WhatsApp is also losing market share to rivals.
In recent months, TikTok, the short-video platform, has become one of the favorite venues for advertisers targeting Gen Z and millennials.
In addition, Apple's change in its privacy-protection policy now prevents Facebook from tracking the online habits of its users and then displaying ads corresponding to their history of online interactions.
Meta shares have lost 73% of their value since January, translating to over $680 billion in market value being wiped out.
It is not certain that the job cuts meet the expectations of investors, who want the company to also sharply reduce investment dedicated to the metaverse, Zuckerberg's next big thing.
Meta doubled down on its bet last month: "Our growth in cost of revenue is expected to accelerate, driven by infrastructure-related expenses and, to a lesser extent, Reality Labs hardware costs driven by the launch of our next generation of our consumer Quest headset later next year," the company said, referring to the division that houses the metaverse projects.
The concept, which depicts an immersive 3D world in which we will interact via virtual reality headsets and goggles, has already gobbled up nearly $20 billion since 2021.
But there's still no sign that it's going to turn to gold.
