Zoom, the popular video conferencing platform, has announced a major workforce reduction of approximately 15% of its employees, which translates to roughly 1,300 positions. The decision to lay off such a significant portion of its workforce was a difficult but necessary one, according to Eric Yuan, CEO and founder of Zoom.
In a message to employees, Yuan explained that Zoom’s rapid growth during the pandemic created the need for a rapid staffing increase, but the company did not take enough time to thoroughly analyze its teams or assess whether it was growing sustainably. The current economic uncertainty, combined with its impact on the company’s customers, has forced Zoom to reassess its operations and take steps to ensure its long-term success.
Yuan and members of the executive leadership team are taking accountability for the company’s recent missteps, with Yuan reducing his salary for the coming fiscal year by 98% and forgoing his FY23 corporate bonus. Additionally, members of the executive team will reduce their base salaries by 20% and also forgo their FY23 corporate bonuses.
Affected employees, who will be notified via email, will be offered a comprehensive support package including salary and healthcare coverage for up to 16 weeks, payment of their earned FY’23 annual bonus, vesting of RSU and stock options, and outplacement services such as 1:1 coaching, workshops, and networking groups.
Shares of Zoom (ZM) jumped 10% on the news, after previously trading up less than 1%. Although the company was one of the biggest beneficiaries during the pandemic, it has struggled lately as employees have returned to the office. Its stock has fallen 40% over the past 12 months.
The increased competition from apps like Google Meet and Microsoft Teams, as well as the impact of the global economy, may be contributing to Zoom’s struggles. To address these challenges, the company has been trying to integrate more features and become more of an all-purpose tool, but these changes may not have been enough. Zoom is scheduled to announce its fiscal fourth-quarter earnings on February 28, with analysts expecting earnings of 81 cents per share on revenue of $1.1 billion.
The news of the layoffs has been met with disappointment by many in the tech industry, but Zoom’s commitment to supporting its departing employees and its continued dedication to realizing its platform vision has been well received. As the world continues to navigate the aftermath of the pandemic, companies such as Zoom must make tough decisions to ensure their long-term success, and it remains to be seen how the company will fare in the coming months.
