Salesforce has announced plans to lay off about 10 per cent of its workforce, becoming the latest tech group to cut costs as businesses tighten their belts to cope with an economic slowdown.
The software group, which had about 73,541 employees at the end of January 2022, on Wednesday said it would also close some offices as part of its restructuring plan to improve operating margins.
“The environment remains challenging and our customers are taking a more measured approach to their purchasing decisions,” Marc Benioff, chief executive, said in a letter to employees on Wednesday.
The move comes as tech companies have announced a wave of deep job cuts in recent months as they grapple against a backdrop of rising inflation and high cost of capital.
“As our revenue accelerated through the pandemic, we hired too many people leading into this economic downturn we’re now facing, and I take responsibility for that,” said Benioff.
Salesforce has faced a difficult period in recent months. It has come under pressure from activist hedge fund Starboard Value, which took a stake last year and is calling for the cloud software group to increase its margins. In October, Starboard said the company had not taken advantage of its position as a market leader.
In November, co-chief executive Bret Taylor announced his departure, while other top executives, including chief product officer Tamar Yehoshua and Stewart Butterfield, chief executive of Salesforce-owned messaging service Slack, have also left.
Salesforce expects to incur about $1.4bn to $2.1bn in charges associated with its new restructuring plan.
About $1bn to $1.4bn of the charges are expected to be related to employee transition, severance payments, employee benefits and share-based compensations. Exit charges from reducing office space are forecast to be around $450mn to $650mn.
Employees affected by the decision received an email this morning informing them of the company’s decision. US employees will receive a minimum of nearly five months of pay, health insurance, career resources and other benefits. Employees outside the US would receive a “similar level of support”, Benioff said.
The employee restructuring is expected to be “substantially” complete by the end of the company’s fiscal 2024 year.