Visitors take photos in front of the Meta sign at its headquarters in Menlo Park, California on December 29, 2022.
Typhoon Koskun Anadolu Agency | getty images
It is also believed that investors value cash above everything else in many cases. The tech industry has long prioritized reinvesting excess cash into growth, ramping up hiring and experimenting with the next big thing. But after a year of massive layoffs and capital conservation, Meta announced Thursday that, for the first time, it will pay a quarterly dividend of 50 cents per share, while also authorizing an additional $50 billion stock repurchase plan.
“The key to these companies is really that they’ve been able to re-invent themselves,” Daniel Flax, an analyst at Neuberger Berman, said in an interview with CNBC’s “Squawk Box” on Friday. “They continue to invest for the future and play aggressively while also managing expenses in this difficult environment,” he said.
Amazon is moving less aggressively to send cash to shareholders, but the topic is certainly being discussed. The company launched a $10 billion buyback program in 2022 and has not made any announcements since then. On Thursday’s earnings call, Morgan Stanley analyst Brian Novak asked about plans for additional capital returns.
Finance chief Brian Olsavsky responded, “I’m really excited to be asked that question.” “No one has asked me this in three years.”
Olsavsky said that “we debate and discuss capital structure policies annually or more frequently,” but said the company had nothing to announce. “We are pleased to have better liquidity at the end of 2023 and will look to continue this,” he said.
After years of unbridled growth, the world’s largest Internet companies are firmly entering a new era. They are still looking for the best tech talent, especially in areas like artificial intelligence, but growth in the number of employees has been measured. Increasing staff in some parts of the business will likely mean moving work elsewhere.
For example, Meta CEO Mark Zuckerberg told investors that when it comes to AI, “We are playing to win here and I expect us to continue to invest aggressively in this area to build the most advanced clusters.” will continue.”
Later on the call, when Zuckerberg was asked about increasing the number of employees, he said the new hires would be “relatively minimal compared to what we would have done historically,” adding, “I’d like to keep things minimal. I want.”
Olsavsky said most Amazon teams want to “maintain headcount, maybe go down as we bring efficiencies to the size of our business.”
This story is playing out in Silicon Valley. According to the website Layoffs.fyi, January was the busiest month for tech job cuts since March, with nearly 31,000 layoffs across 118 companies. Amazon and Alphabet cut their 2023 job losses with more layoffs last month, as did Microsoft, which eliminated 1,900 roles in its gaming unit shortly after closing its acquisition of Activision Blizzard.
SAN FRANCISCO, CALIFORNIA – June 23: Xbox CEO Phil Spencer arrives in federal court on June 23, 2023 in San Francisco, California. Top executives from Microsoft and Activision/Blizzard will testify during a five-day hearing against the FTC to determine the fate of the two companies’ $68.7B merger. (Photo by Justin Sullivan/Getty Images)
Justin Sullivan | Getty Images News | getty images
Downsizing hit the cloud software market this week, where Okta announced it was cutting about 400 jobs, or 7% of its workforce, and Zoom confirmed it was laying off less than 2% of its workforce. Which is equal to approximately 150 posts. Zuora announced plans to cut 8% of jobs, or about 125 positions based on the latest headcount data.
Evan Sohn, president of Recruiter.com, called it “a very confusing job market.” Last year, tech companies were reacting to dramatically changing market conditions – rising inflation, rising interest rates, risk aversion – following an extended bull market. Meta cuts more than 20,000 jobs in 2023, Amazon lays off more than 27,000 people, and Alphabet cuts more than 12,000 positions.
The economy is in a very different place today. Growth is back to a healthy state, inflation appears to be under control and the Federal Reserve is signaling that a rate cut may be possible this year. Unemployment stood at 3.7% in January, down from 6.4% three years ago, when the economy was opening up from pandemic lockdowns. And the Labor Department’s Bureau of Labor Statistics reported Friday that nonfarm payrolls increased by 353,000 last month.
Tech stocks are surging, with Meta, Alphabet and Microsoft all at or near record levels.
But the industry continues to decline.
“Companies are still in the cleanup from ’23,” Sohn told CNBC’s “Worldwide Exchange” this week. “There may be a change in skills, different skills needed to really handle the new world of 2024.”
Wall Street is rewarding tech companies for better discipline and cash distribution, but that raises questions about where they can turn for significant growth. Apart from Nvidia, which had a banner 2023 due to rising demand for AI chips, none of the other mega-cap tech companies are growing at their historical averages.
Even Meta’s better-than-expected 25% growth for the fourth quarter is a bit misleading, as comparable numbers from a year ago were dwarfed by a slowing digital ad market and Apple’s iOS update, which made it easier to target ads. It had become difficult. Finance chief Susan Lee reminded analysts Thursday that as 2024 progresses, the company will “end a period of increasingly strong demand.”
By the end of this year, analysts predict that growth in meta will again reach the low teens. Growth projections for Amazon and Alphabet are even lower, a good sign that calls for capital allocation measures may intensify.
Ben Barringer, technology analyst at Quilter Cheviot, told CNBC that Meta’s decision to pay a dividend was a “symbolic moment” in that regard.
“Mark Zuckerberg is showing he wants to bring shareholders on board and is highlighting that Meta is now a mature, growing business,” Barringer said.
— CNBC’s Anne Palmer contributed to this report
Watch: Meta’s Q4 report shows it’s making great use of Nvidia’s chips
Source: www.cnbc.com
