For years, Wall Street railed against Silicon Valley’s refusal to pay dividends and buy back shares while tech companies grew into cash-generating machines.
That’s no longer a problem, even though these tech companies are generating less profits than in previous years. In fact, some tech companies are essentially paying off Wall Street even as they shed the workers who made them multibillion-dollar tech giants in the first place.
Meta Platforms Inc. META, +2.79%, was the latest to pledge pay cuts will flow back to investors and announced a fresh $40 billion share buyback authorization, albeit more than $10 billion remain in its buyback funds. The news overshadowed an earnings drop and Meta’s third straight quarter of declining sales and earnings, and the impact was hard to miss — shares are up nearly 20% in after-hours trading, a move that added about $80 billion to the company’s market cap would become the parent company of Facebook.
Meta’s massive stock purchase guarantee contributes to Intel Corp’s decision. INTC at, +2.87% on executives’ decision to keep a dividend that returned $6bn in the red in the first quarter last year. While Intel is laying off employees, cutting wages and shelving some plans to expand its manufacturing business to avoid $3 billion in costs, Intel is expected to pay dividends of around $1.5 billion in the first quarter .
More: Intel’s stock dividend stands out among chipmakers
The disparity between the money being spent to appease Wall Street and the money saved by cutting the payroll is even more disparate for Facebook. The company said its restructuring efforts cost $4.2 billion in the fourth quarter, including real estate consolidation, severance and write-downs of data center assets — barely 10% of the new share buyback authorization.
After laying off more than 11,000 employees, or about 13% of its global workforce, Meta still anticipates an additional $1 billion in restructuring costs in 2023. Chief Executive Mark Zuckerberg took the blame for the cuts when they were announced as a macroeconomic downturn accelerated and made Meta’s massive growth look like wasteful spending.
More from Therese: Intel just had its worst year since the dot-com bust, and it’s not going to get any better any time soon
However, Zuckerberg on Wednesday sounded like he was actually happy about the cuts. He said that while the layoffs were difficult, he noted that Meta was already operating better and the company will focus more on profitability and the company couldn’t “treat everything like it’s hyper-growth.”
“For the first 18 years, I think we grew 20%, 30% compound or a lot more every year, right?” Zuckerberg told analysts when the company called. “And then, of course, that changed very dramatically in 2022 when our sales were negative for growth for the first time in the company’s history.”
But he said that once Meta started cutting costs, he admitted, “I actually think it makes us better.”
Meta is thus an example of the good and bad influence of Wall Street on a company. Some tech giants clearly got too big during the COVID-19 pandemic to continue operating at the same profit levels in an economic downturn. The company has actually listened to investors who have called for some cost cuts, though that hasn’t dampened Zuckerberg’s vision for the Metaverse.
Also Read: Facebook and Google Became Titans By Ignoring Wall Street
However, these cuts should be felt by everyone involved, not just the employees. When a company shrinks — Intel’s earnings fell more than 60% last year, while Meta’s fell more than 40% — everyone involved should feel the pain, rather than blaming that pain on workers and investors at the same time to reward. But King Zuckerberg will now see the value of his special founder stock soar while the workers he laid off have to look for new jobs to pay their mortgages.