December and January are scary months for the job market. At year-end, companies cut costs ahead of a slowdown the next year. At the start of the year, companies do the same. Salesforce said that it would cut around 10% of its workforce on Jan. 4. The company over-hired staff before the economic downturn.
Co-CEO Marc Benioff said that he takes responsibility for hiring too many people based on revenue acceleration during the pandemic. The staff getting cut will suffer the consequences of his responsibility. Still, shareholders responded positively by sending CRM stock higher after the news.
Salesforce’s re-forecast of a slowdown suggests that the cloud software sector is on a downtrend. Investors should avoid companies trading at similar valuations. CRM stock trades at nearly 5 times sales. It has a forward P/E of around 25 times.
Amazon.com (AMZN) announced on Jan. 4 that it would reduce its headcount by over 18,000 employees. CEO Andy Jassy said that the company extended its annual planning process into the New Year.
Amazon’s staff cut is significant, given they are corporate. This will become the company’s largest layoff in company history.
Although AMZN stock rose after the news, the cut implies an ongoing slowdown in the e-commerce sector.
