Zuckerberg and Intel are transport the proceeds from their layoffs straight to Wall Street

For years, Wall Street groused about Silicon Valley’s refusal to pay dividends and purchase again inventory as tech corporations grew into cash-generating machines.

That is not an issue, though these tech corporations are producing fewer earnings than they had been in earlier years. In truth, some tech corporations are principally paying off Wall Street whilst they lower the employees that made them multibillion-dollar tech giants within the first place.

Meta Platforms Inc.
META,
+2.79%
was the newest to vow that payroll cuts will movement again to buyers, saying a recent $40 billion stock-repurchase authorization regardless of having greater than $10 billion remaining in its buyback coffers. The news overshadowed an earnings miss and Meta’s third consecutive quarter of declining gross sales and revenue, and the consequences had been exhausting to overlook —- shares spiked practically 20% in after-hours buying and selling, a transfer that will add roughly $80 billion again to the market capitalization of Facebook’s guardian firm.

Meta’s large stock-buying assure provides to Intel Corp.
INTC,
+2.87%
executives’ determination to keep up a dividend that paid out $6 billion to buyers final yr, regardless of the chip maker’s free money movement falling to damaging in 2022 and expectations that it is going to be within the pink once more for the primary quarter. While shedding employees, reducing pay and shelving some plans to develop its fabrication enterprise with the intention to take away $3 billion in prices, Intel is anticipated to pay roughly $1.5 billion in dividends within the first quarter.

For extra: Intel inventory’s dividend stands out amongst chip makers

The disconnect between the cash spent to assuage Wall Street and the cash saved by slashing payroll is much more disparate for Facebook. The firm mentioned its restructuring efforts value $4.2 billion within the fourth quarter, together with actual property consolidation, severance and writing down of knowledge heart belongings — barely 10% of the recent stock-repurchase authorization.

Meta nonetheless expects a further $1 billion in restructuring prices in 2023, after shedding greater than 11,000 workers, or about 13% of its world workforce. Chief Executive Mark Zuckerberg took the blame for the cuts once they had been introduced, as a macroeconomic downturn accelerated and made Meta’s large progress appear to be profligate spending.

More from Therese: Intel simply had its worst yr for the reason that dot-com bust, and it gained’t get higher anytime quickly

Zuckerberg on Wednesday appeared like he was really glad concerning the cuts, although. He mentioned that whereas the layoffs had been troublesome, he discovered that Meta was working higher already and the corporate shall be extra centered on profitability, and the corporate can’t “treat everything like it’s hyper-growth.”

“For the first 18 years, I think we grew it 20%, 30% compound or a lot more every year, right?” Zuckerberg advised analysts on the corporate’s name. “And then obviously that changed very dramatically in 2022 where our revenue was negative for the growth for the first time in the company’s history.”

But he mentioned that as Meta began doing the work of cost-cutting, he admitted “I actually think it makes us better.”

Meta thus is an instance of the nice and unhealthy affect of Wall Street on an organization. Clearly, some tech giants turned too bloated in measurement throughout the COVID-19 pandemic to proceed to function on the similar revenue ranges in an financial downturn. The firm really listened to buyers who advocated for some prices to be lower, even when that hasn’t dampened Zuckerberg’s imaginative and prescient for the metaverse but.

Read additionally: Facebook and Google grew into titans by ignoring Wall Street

Those cuts needs to be felt by all concerned, although, not simply workers. When an organization is shrinking — Intel’s earnings declined by greater than 60% final yr, whereas Meta’s fell by greater than 40% — all concerned ought to really feel the ache, as an alternative of pushing that ache on employees whereas rewarding buyers. Yet King Zuckerberg now will see the worth of his particular founder shares spike, whereas the employees he laid off scramble for a brand new job to allow them to pay their mortgage.

Source web site: www.marketwatch.com

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