Cloud-based software firm Salesforce Inc., did a lot of hiring during the pandemic.
With pandemic fears and woes easing, the company now finds itself with a bloated workforce in times of an economic slowdown.
On Wednesday, Salesforce said it will cut jobs by some 10% and close some offices, according to multiple reports.
Businesses that relied on cloud services during the pandemic are now trying to reduce expenses and are delaying new projects, hurting companies such as Salesforce and Microsoft Corp (MSFT.O), Reuters reported.
“The environment remains challenging and our customers are taking a more measured approach to their purchasing decisions,” Salesforce co-Chief Executive Officer Marc Benioff said in a letter to employees.
“As our revenue accelerated through the pandemic, we hired too many people leading into this economic downturn we’re now facing, and I take responsibility for that.”
Salesforce had nearly 80,000 employees at the end of the third quarter, up from about 70,000 a year earlier, Reuters reported.
Salesforce shares were up 3% on Wednesday, according to CNBC. Salesforce will record charges of $1.0 billion to $1.4 billion related to the headcount reductions, and $450 million to $650 million related to the office space reductions, the company said.
Shares of Salesforce closed up more than 3% on Wednesday.
“It (the company) is certainly not alone as the sector has grappled with a demand environment that has meaningfully softened over the last 12 months,” William Blair analyst Arjun Bhatia told Reuters.
The move puts Salesforce in a good position to meet its 2026 target of 25% operating margin but the macro backdrop could pose risk to its $50 billion revenue target, Bhatia said.
