Amazon to sack 18,000; taps $8bn loan. CEO Jassy: “We’ll be scrappy”
Amazon is cutting over 18,000 jobs, CEO Andy Jassy has confirmed – saying he was pressed into revealing the news before contacting employees “as one of our teammates leaked this information externally.”
The majority of the 18,000 Amazon job cuts will be concentrated in Amazon Stores and HR, including its “People Experience and Technology Solutions arm”, also known as PXT, Jassy said on January 4.
Affected staff, including in Europe, will be notified January 18.
Amazon lost over $1 trillion in market value in 2022 amid a market downturn. In April 2022 the company reported its first quarterly loss in seven years, losing $3.8 billion. In its last reported quarter (Q3) on October 27, 2022, Amazon posted a net loss of $3 billion for the nine months of its financial year.
The Amazon job cuts come eight weeks after Beth Galetti, SVP of People Experience and Technology said “We still intend to hire a meaningful number of people in 2023.” The company did not reference AWS, where cuts are expected to be less deep, but even in its cash cow cloud computing arm growth has slowed.
18,000 Amazon job cuts follow $8bn financing move
The news comes days after the company revealed that it had taken out an unsecured $8.0 billion loan with a 364-day term for “general corporate purposes” with a consortium that includes the Australia and New Zealand Banking Group, Banco Bilbao, Bank of China, Credit Agricole, DBS, Mizuho, and Natwest.
The loan can be extended a further year.
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Citing an “uncertain macroeconomic environment” Amazon said that in recent months it had used “different financing options to support capital expenditures, debt repayments, acquisitions, and working capital needs.”
Jassy said: “we’ll be inventive, resourceful, and scrappy in this time when we’re not hiring expansively and eliminating some roles. Companies that last a long time go through different phases.
“They’re not in heavy people expansion mode every year.”
Cash cow AWS has seen growth slow
The decision comes as AWS growth has also slowed notably.
A shift by CIOs to cost control has hit AWS’s margins, as has the volatility in energy prices in recent years.
“[We need to] balance investments versus renegotiating pricing with the long-term customer commitments, all [are] headwinds to the business, offset by increasing productivity and efficiencies in our data centers, which drive profitability” admitted AWS CFO Brian Olsavsky on a Q3 Amazon earnings call on October 27.
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He added: “What we see is customers are looking to save money versus their committed spend.”
Unlike a dip in 2020, when demand for cloud services dropped sharply at some companies and spiked at others “that dynamic is not in place right now, and I think everyone is just cautious and they want to, again, watch their spend. As CFO, I appreciate that, and we’re doing the same thing here at Amazon” he added.
Challengingly for Amazon, the slowdown comes as it has committed to “an approximately $10 billion year-over-year increase in technology infrastructure, primarily to support the rapid growth, innovation and continued expansion of our AWS footprint” as part of its $60 billion capital outlook for full-year 2022.
Across the technology industry others are also slashing headcount and often CapEx. As The Stack reported, Micron for example is cutting spending on memory chip fabrication by 50% in 2023 and slashing 10% of its workforce, after revenues fell 47% year-on-year in its fiscal 2023 Q1, and operating margin tumbled to -2%, from an operating margin of 35% in the prior year. Executives moved to “bolster liquidity” by raising $3.4 billion in debt.