Zoom Video Communications Inc ZM-Q said on Tuesday it would cut about 1,300 jobs, as demand for the company’s video conferencing services slows with the waning of the pandemic, and take a related charge of up to $68 million.
The company’s shares, which fell 63 per cent last year amid a rout in technology shares, closed up 9.9 per cent on the news but were down marginally in extended trading.
While announcing the layoffs, which will hit nearly 15 per cent of its workforce, Chief Executive Officer Eric Yuan said he would take a pay cut of 98 per cent for the coming fiscal year and forego his bonus.
“We worked tirelessly… but we also made mistakes. We didn’t take as much time as we should have to thoroughly analyze our teams or assess if we were growing sustainably, toward the highest priorities,” Yuan said.
Zoom will incur about $50 million to $68 million in charges related to the layoffs, according to a regulatory filing on Tuesday. The company said a substantial part of it will be spent in the first quarter of fiscal 2024.
The company, which became a household name during lockdowns due to the popularity of its video-conferencing tools, has seen its revenue growth slow.
Analysts are forecasting Zoom’s revenue to have risen just 6.7 per cent in fiscal 2022 after a more than four-fold jump in revenue and a nine-fold surge in profit increase in 2021. Profit is estimated to have fallen 38 per cent in 2022.
“I would say incrementally, maybe this is telling us we shouldn’t expect reacceleration in the near-term on the revenue side, but we could see additional upside to margins for a company that is already profitable,” RBC Capital Markets analyst Rishi Jaluria said.
Zoom had bumped up hiring during the pandemic to meet surging demand, but now joins U.S. companies in reining in costs to brace for a potential recession.
A raft of U.S. companies from Goldman Sachs Group Inc to Alphabet Inc have laid off thousands this year to ride out a demand downturn wrought by high inflation and rising interest rates.
The video conferencing software maker also said that its executive leadership team will reduce their base salary by 20 per cent in the same period.
Departing employees will receive 16 weeks of salary, healthcare coverage and a bonus for the year, Yuan said.