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    Layoffs Looming over Amazon

    The bad news keeps coming in from the tech industry. According to industry reports, Amazon will lay off 10000 employees this week. The announcement came just days after the largest mass layoffs in Meta’s history and Twitter firing half its workforce. The decision is part of the extensive cost-cutting review that has been going on for months under CEO Andy Jassy.

    Corporate-level staff, human resources, and retail units are on the chopping block and under Amazon’s axe. The company has already axed several contractors working on recruiting by abruptly ending their projects. The layoffs target some of the company’s unprofitable businesses, such as the devices business, which includes Alexa.

    During the cost-cutting review, Amazon found that the device business generated an annual loss of $5 billion in the last few years. The Alexa unit employs over 10000 people and receives significant capital investments. Expanding Alexa’s capabilities and adding new features has been debated. Customers use Alexa for a limited number of functions, so is spending money on Alexa a worthy investment?

    “Our senior leadership team regularly reviews our investment outlook and financial performance, including as part of our annual operating plan review,” an Amazon spokesman said in a statement. “As part of this year’s review, we’re, of course, taking into account the current macro-environment and considering opportunities to optimize costs.” The spokesman said Amazon is “as optimistic about Alexa’s future today as we’ve ever been, and it remains an important business and area of investment for Amazon.”

    Amazon has decided to close or suspend some unprofitable businesses. The leadership realized that specific roles were no longer necessary. Employees have been given time to find other organizational roles in such cases. The idea is to redeploy people into more profitable projects. The exact number of layoffs may differ from the estimated 10000 since the decisions will be made on a team-by-team basis.

    The decision to sack people is not surprising. In October, Amazon instituted a hiring freeze across the retail division. Amazon’s headcount was down a whopping 78000 in September compared to the first quarter. The expected layoffs will impact 3% of Amazon’s Corporate staff and 1% of its global workforce. Amazon currently employs close to 1.5 million people.

    Layoffs seem to be happening everywhere in the Tech industry because the macroenvironment is primed for an economic downturn. In Amazon’s case, the timing seems odd. Winters are usually profitable for Amazon since sales peak during the holiday season. Amazon continues to hire people at warehouses to prepare for a busy fourth quarter. The company expects that the fourth quarter may be financially challenging. According to CFO Brian Olsavsky, some indicators show people feeling the effects of inflation.

    Amazon may be starting to feel the effects of the strategic decisions taken during the lockdowns at the height of the pandemic. They hired more than 800000 employees at their warehouses between 2019 and 2021 to handle the surge in online orders. After earning a net income of $33 billion in 2021 and $21 billion in 2020, Amazon has suffered a net loss of $3 billion in the first three quarters of 2022.

    The last time Amazon conducted a review like the one currently ongoing was in 2017 under founder Jeff Bezos. Andy Jassy’s review is reported to be more extensive and focused on making the company profitable under the difficult circumstances looming over the tech industry.

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    About the Author

    Kamal Rastogi is a serial IT entrepreneur with 25 yrs plus experience. Currently his focus area is Data Science business, ERP Consulting, IT Staffing and Experttal.com (Fastest growing US based platform to hire verified / Risk Compliant Expert IT resources from talent rich countries like India, Romania, Philippines etc...directly). His firms service clients like KPMG, Deloitte, EnY, Samsung, Wipro, NCR Corporation etc in India and USA.

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