Mark Zuckerberg will lay off 10 percent of Meta’s employees this week as the company begins its first mass downsizing in its 18-year history, an analyst has predicted.
The 38-year-old Facebook founder is planning a “major” job cut that could total around 8,700 employees after the company’s profits plummeted, rendering nearly $80 billion worthless.
Analyst Gene Munster, a managing partner at Loup, which invests in Meta, said the job cuts are the biggest of any big tech company.
Details of Meta’s plans come after Twitter’s new boss, Elon Musk, brutally laid off half its workforce, some 3,750 employees – becoming the latest tech company to wield the axe.
Meta, which owns Facebook, Instagram and WhatsApp, has around 87,000 employees – so a 10 percent cut would mean more than double Twitter’s job cuts.
Analyst Gene Munster predicts Meta will lay off 10 percent of its staff, but said cuts are “necessary.”
Meta CEO Mark Zuckerberg plans “major layoffs” — the first in the company’s history
Munster said the layoffs were “entirely necessary”.
But he said Meta will likely hire thousands more over the next year as it continues to throw resources at its struggling Metaverse unit called Reality Labs.
Munster tells Squawk Box on CNBC: “In that case, he’ll probably — they didn’t give exact numbers — 10 percent cut, which will be the largest headcount of any big tech company.”
Munster said Meta’s decision was “a step in the right direction”.
Shares of the company rose more than five percent on Monday morning after the cuts were announced.
But it’s still a staggering 71.5 percent lower than it was in early 2022.
Meta’s stock price rose slightly on news of the cuts — but it’s still down 71 percent this year
Zuckerberg has poured billions into his Metaverse project, but is struggling to attract users
“In a way, I’m a little surprised to see the stock reaction since Zuckerberg talked about it on his conference call a few weeks ago,” Munster added.
“Specifically, he said headcount would be virtually flat a year from now, so basically what’s going on is they’re going to reduce headcount by 10 percent and increase headcount within the Metaverse.
“I think putting all of this together is a welcome relief for meta-investors.”
He said, “It’s good that they’re showing some financial responsibility, but still, Meta’s future will largely depend on the Metaverse – which way that moves.”
Investors want the headcount to be reduced in 2024, he said.
It’s not clear how Meta employees will be notified who will be fired, but Zuckerberg has been known to hold company-wide calls to make important announcements.
Twitter boss Elon Musk used brutal tactics to lay off half his employees, lock them out of their offices and laptops, and then email workers to notify them.
Zuckerberg will want to avoid the backlash Elon Musk is facing over his brutal Twitter firings
Munster said Meta would lay off 10 percent of its employees, the most of any tech company by headcount
The strategy has been heavily criticized by both employees and observers – and Zuckerberg will likely want to avoid a similar backlash when he announces his cuts.
In addition to economic uncertainty in the near future, Meta’s troubles stem in part from the lukewarm reception of its flagship project, Metaverse.
Meta has spent billions and hired thousands of people around the world to build the Metaverse, which refers to a shared digital environment that uses augmented or virtual reality technology to make it feel more realistic.
But the company’s dreams have fallen short as the Reality Labs unit that works on augmented and virtual reality has consistently reported staggering losses.
It lost $5.8 billion in the first six months of the year.
THE FACEBOOK “METAVERSE”: A VIRTUAL WORLD WITHIN A WORLD
Mark Zuckerberg has said he wants people to think of Facebook not as a social media company but as a “metaverse” company.
This is a virtual environment where people can work and play most of their 24 hours without leaving their homes.
“And I hope that if we do this well, I think over the next five years we’ll effectively move from the people who see us primarily as a social media company to a metaverse in this next chapter of our company.” Company,” Zuckerberg said in a 2021 interview with The Verge.
“And of course, all of the work we do on the apps that people are using today directly contributes to that vision in terms of community and developer building.
“But that’s something I spend a lot of time on, think a lot about, we’re working on a ton. And I think it’s just a big part of the next chapter for the work we’re going to do across the industry.’
What exactly is the metaverse?
As Zuckerberg describes it, it’s a “vision” that spans the entire tech industry, billing it as the successor to the mobile internet.
“But you can think of the metaverse as an embodied internet where you’re not just looking at content, you’re in it,” he continued.
“And you feel present with other people, like you’re in other places, and you’ve had different experiences that you couldn’t necessarily have on a 2D app or website, like dancing or different types of fitness.”
The Facebook CEO says his vision, which he has been working on for several months, would include not only virtual reality but also augmented reality, computers, mobile devices and gaming consoles.
Zuckerberg has said it will be several years before the Metaverse is realized to its full potential.
Meta Platforms Inc is forecasting a weak holiday quarter and significantly higher costs next year, which will take away about $67 billion from Meta’s market value, adding to more than half a trillion dollars already lost this year .
The disappointing outlook comes as Meta grapples with slowing global economic growth, competition from TikTok, privacy changes from Apple, concerns about massive spending on the Metaverse, and the ever-present threat of regulation.
The upcoming layoffs were first reported in the Wall Street Journal.
Zuckerberg said on the last conference call in late October, “In 2023, we will focus our investments on a small number of high-priority growth areas.
“So that means some teams will grow significantly, but most other teams will remain flat or shrink over the next year.”
“Overall, we anticipate ending 2023 at either roughly the same size or even a slightly smaller organization than today.”