Daily Archives: July 23, 2022

After Big Tech grew in unprecedented and unchecked fashion for a decade, building ostentatious palaces to house growing workforces while plying them luxuriant freebies to keep them from defecting to rivals, is the wild ride over?

Techs largest companies, as well as their smaller competitors, are looking to cut back as they face a litany of headaches: Billions of dollars in unused commercial real estate; supply-chain and cost issues; evaporating funding; a 21% drop in global M&A activity in the first half of the year to $2.2 trillion, according to new data from Refinitiv; an all-but-shut window on IPOs; wage inflation; talent retention.

The chief executives of Meta Platforms Inc. META, -7.59% and Alphabet Inc.s GOOGL, -5.63% GOOG, -5.81% Google have warned employees of tough times ahead with Mark Zuckerberg telling employees on the last day of the second quarter that the company faced one of the worst downturns that weve seen in recent history and Microsoft Corp. MSFT, -1.69% is slowing hiring in some groups and eliminating a few jobs. Even the worlds most valuable company, Apple Inc., AAPL, -0.81% reportedly plans to scale back hiring and spending, after profligate spender Amazon.com Inc. AMZN, -1.77% signaled cutbacks earlier this year. Other high-flying tech players in recent years, such as Netflix Inc. NFLX, -1.54%, Snap Inc. SNAP, -39.08% and Lyft Inc. LYFT, -4.45% are making similar or more drastic moves, and many startups are in much worse shape.

See also: Tech companies are shifting to layoffs after a huge ramp up in hiring

All of these are signs of vexing changes coming to the industry after a boom during the first two years of the pandemic, when tech companies indulged in a frenzy of hiring and spending and allowed some employees cushy work-from-home schedules. But inflation, supply-chain woes, the war in Ukraine and the prospects of recession could impede what venture-capital legend Bill Gurley called a Disney-esqueset of experiences/expectations in high tech companies.

The perfect storm of economic calamity has led one legendary executive to predict nothing short of a bloodbath in the tech market for the next one to three years that could dramatically change the culture and business structure of companies in Silicon Valley and beyond for the foreseeable future.

Its going to be a lot of pain, and a lot of people will get hurt, C3.ai Inc. AI, -13.79% CEO Tom Siebel told MarketWatch. We had this SPAC, NFT, crypto craziness. The days of everyone making lots of money, working at home in pajamas, being paid in bitcoin, thats over.

Before this is over, there will be lots of empty commercial real-estate buildings like we saw in 2000-01 in Silicon Valley, Siebel added. Not as many, but a lot.

Employees are especially feeling the pinch. A recent LinkedIn poll revealed 60% of respondents were either worried or very worried about their careers because of economic uncertainty.

Read: The Great Renegotiation Millions of employees quit old jobs for better ones

Camelot is over for them. Its over, Hilary Kramer, a nationally-renowned investment analyst and portfolio manager, told MarketWatch. This growth was not sustainable, and COVID undoubtedly helped prolong strong results for Amazon, Apple, Netflix, Microsoft and all the videogame makers.

Tech giants flush with billions in cash arent crying poor, but with a possible recession on the horizon, even those with the deepest pockets have a strong motivation to watch their bills. Imagine, then, the quandary for smaller companies dependent on funding with little chance of going public anytime soon, or those stuck in the middle.

Qualtrics International Inc. XM, -5.92% CEO Zig Serafin picked up on a depressing vibe after speaking with about 100 CEOs in Europe over the past 90 days. Their concerns over interest rates, inflation, supply-chain constraints, talent retention and geographical uncertainty has prompted a healthy level of caution going forward for the experience-management platform company. Though demand for Qualtrics software remains strong, he said some deal cycles are going through more approval among cost-conscious customers.

Remember this whole Roaring 20s thing? The feeling was, Hey, we have to go big, and some companies overspent and over-hired, Vijay Chattha, CEO of VSC, said.

Fledgling enterprise-software companies dependent on funding to grow operations face especially tough sledding, said Appian Corp. APPN, -5.40% CEO Matt Calkins, who agreed with Gurley that Silicon Valley workers lived in a fantasyland of higher pay and perks for the past few years.

One likely consequence, Calkins said, is a forced return to dazzling business parks like Apple Park and the Googleplex, where we are wasting a lot of money on commercial real estate.

CEOs believe in-person work is more productive, he said.

As the companies look to cut costs in the form of layoffs, reduced travel and fewer hires, another tactic is to require workers to return to the office and say goodbye to those who will not. A vast majority of tech employees have been loath to return to the office despite efforts by the largest tech giants.

For more: How to handle the dreaded return-to-work Zoom call with your boss

It was a remarkable, anomalous era for work: To be paid so much and to work in ideal conditions, Calkins said. But to paraphrase Bill Gurley, the days of fantasyland are over.

Google and Meta have brought employees back to the office at least twice a week. Metas offices were opened at full capacity on March 28, though anyone who can do their job remotely can apply for full-time remote work. The company offers a flexible hybrid schedule where Individual teams determine how often to gather in the office.

Apple was ready to make the move this summer but postponed in May after more than 1,000 current and former employees signed an open letter calling the plan inefficient, inflexible and a waste of time. Microsoft does not mandate employees return to the office, but considers it standard to drop in 50% of the time. Employees can request more flexibility to their schedules.

In January, about half of leaders said their company required or planned to require employees to return to in-person work full-time in the next year, according to research fromMicrosoft, which surveyed 31,102 workers around the world between January and February. Yet just 4% of employers said they require all employees to return to the workplace full-time, based on a survey of employers from the Conference Board.

Many companies are making the hybrid experience a permanent reality, with more productivity tools such as digital white boards, smart galleries, and workspace reservation areas, Zoom Chief Operating Officer Aparna Bawa told MarketWatch. There are more tools at your disposal, she said.

Those that do not walk that path, though, could take the departures of workers who do not want to return with a sigh of relief, as it means they can avoid another layoff and the severance that would come with it. The dynamic feels like a complete turnaround from a year ago, when many tech workers were considering walking away, especially if companies required them to return to the office.

Feeding the general paranoia and caution are notes from financial analysts, such as one predicting an appocolypse, or the bursting of the mobile-app bubble.

We define this tech bear market as an era when expenses require greater justification with regard to [return on invested capital] and [customer lifetime value to customer acquisition cost], money is no longer free flowing, and nearer-term fundamentals matter more than the long-term dream, Bernstein analyst Mark Shmulik said in an ominous July 13 note.

The problem with this approach is that the companies get stuck in a lower growth environment in order to keep margins in check, leading investors to question the growth story a vicious flywheel, Shmulik cautioned.

Dont miss: The cloud boom is coming back to earth, and that could be scary for tech stocks

But Rob LoCascio, the longtime CEO of LivePerson who went through the dot-bomb bust in the early 2000s, sees the current slowdown as a pale imitation of what happened then, and as more of a correctional era.

Back in the early 2000s, we had to restructure the company in 2001 after laying off most of our staff, 140 of 180, because we were losing customers by the hour, LoCascio told MarketWatch. Half of our customers were dot-coms. The situation isnt as dire this time around. We are trimming rather than slashing. There is an overreaction this time by the stock market.

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It's the end of 'fantasyland' for Big Tech and its workers - MarketWatch

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This month Russia's major tech firms have been in conversation with the government to develop a national game engine.

As reported by PC Gamer, these talks for an alternative engine follow after game companies halted their businesses in the country -- in response to its invasion of Ukraine.

The proposed game development resource may require billions of Russian Rubles to fund.

PC Gamer adds that the project is being supported by the country's most prominent digital and internet services providers.

As of March, firms that have pulled out of the Russian games market include Microsoft, Electronic Arts, Activision Blizzard, Epic Games, CD Projekt and Bloober Team.

Nintendo suspended all Russian eshop payments or Switch users and Sony stopped the launch of Gran Turismo 7 at the last minute.

IDG Consulting estimated that the Russian games market alone generated around $3.4 billion last year.

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Russian tech giants in talks to create a national game engine - GamesIndustry.biz

The Federal Government says major tech giants including Google, Facebook, Twitter, YouTube have shown interest in investing and exploring business opportunities in Nigerias digital space.

The Minister of Information and Culture, Alhaji Lai Mohammed said this on Saturday in Epe, Lagos state at the 49th Annual General Meeting (AGM) of the Association of Advertising Agencies of Nigeria (AAAN).

He said that the giant tech and primary digital media platforms which had been exploring the countrys digital media space had been holding meetings with relevant government agencies.

Mohammed said the Federal Government was committed to exploring all the opportunities offered by the techies for the benefit of the people.

The minister said the theme of the AGM, The New World Order: Technology as a Game Changer, was apt.

According to him, the realisation of the power of technology in brand communication necessitated the setting up of the Ministerial Task Team on Audience Measurement System.

He said audience measurement in broadcasting would give accountable and data-driven understanding of the impact of communication on consumer behaviour.

The minister charged relevant parties in the ministerial task team to complete the tasks in order to initiate the legislative processes necessary for the implementation of the audience measurement before the end of the present administration.

Besides audience measurement, the minister said government had given approval for the implementation of other reform initiatives of the Advertising Practitioners Council of Nigeria (APCON).

He said the reform would strengthen the advertising ecosystem, encourage inclusive growth as well as attract investment to the industry.

In his address of welcome, the President of AAAN, Mr Steve Babaeko, commended the minister for his untiring efforts toward repositioning the advertising ecosystem in Nigeria.

The minister was accompanied to the event by the Registrar/Chief Executive of APCON, Dr Olalekan Fadolapo, and the Director-General of the Nigerian Tourism Development Corporation, Mr Falorunso Coker. (NAN)

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Tech giants to invest in Nigeria's digital space FG The Sun Nigeria - Daily Sun

Tech companies have taken a massive hit this year due to the changing interest rate environment. As rates rise, the future earnings of tech companies are worth less in the eyes of investors, leading to downward pressure on their valuations.

Several US tech companies have announced hiring freezes and reduced budgets to tighten things up - a signal that next quarters performance may bring some disappointment1.

As well as Netflix and Tesla, the coming weeks bring results from Meta (formerly Facebook), Alphabet (formerly Google) and Twitter which may add to market jitters.

Netflix hopes to steady the ship

Netflix has had a tumultuous year, with the worlds largest streaming service reporting its first subscriber loss since 2011, losing nearly 1 million subscribers between April and July. The US, Canada and Europe saw the highest number of cancellations.

Between April and June total revenue was $7.9bn, up 8.6% year-on-year but, such is the expectations of todays tech giants, this figure still disappointed the market.

There has been intense competition in the streaming sector with the likes of Netflix, Amazon Prime, Disney+ all battling for viewers.

Netflixs plan to boost profits includes the introduction of an ad-supported service that will be launched in 2023 with Microsoft as well as a crackdown on password sharing, which one survey estimates costs Netflix a whopping $6 billion.

Tesla revenue boost despite supply chain issues

Like Netflix, Tesla has also experienced a downturn. The electric vehicle makers global deliveries fell 18% in the second quarter, compared to the first period2. Tesla said the fall stems from Covid-19 lockdowns at the companys Gigafactory in Shanghai.

However, its latest quarter brings some optimism. Tesla reported a 57% increase in adjusted earnings per share in its latest quarter3.

Analysts expected the company to report second-quarter revenues of $17.23 billion, an 8% decline compared to the previous quarter, according to Refinitiv data. Earnings per share were expected to reach $1.86 per share, a 42% fall from a year ago.

Teslas second quarter revenue reached $16.9bn, up 42% compared to the year before.

In April, Elon Musk said Tesla could raise deliveries by 60% this year, equivalent to nearly 1.5 million vehicles4.

Tesla is the fourth largest holding in the Scottish Mortgage Investment Trust, along with other tech firms including Amazon and Alibaba.

Results from both Tesla and Netflix demonstrate how specific factors can affect individual companies - a supply chain disrupted by lockdown in the case of Tesla and fierce competition in streaming for Netflix.

The market will now be watching the rest of the tech earnings season for any sign that companies are also being affected by a more general economic slowdown.

If they can defy the current negative mood with strong numbers, the market may begin to see beyond the current turbulence. Any disappointments are likely to lead to yet further volatility.

Source:

1The Guardian, 17 July 20222Tech Crunch. 2 July 20223Financial Times, 20 July 20224Yahoo News, 19 July 2022

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Will the tech giants help turn the market around? - Fidelity International

Microsoft plans on cutting back on its open jobs, according to a new report.

That new Bloomberg report suggests those cutbacks will impact multiple units within Microsoft, including cybersecurity and Azure. However, the company will honor current job offers to candidates, and continue to hire for critical roles.

In May, Microsoft announced a hiring slowdown for its Office and Windows divisions. In doing so, it followed other tech giants (including Meta, Salesforce, and Google) in curbing hiring. But even as Microsoft trims its hiring, its intensely focused on retention: CEO Satya Nadellaannounced in an internal emailthat he would double the budget for merit-based salary increases, while the range for annual stock-based compensation would also rise. The most meaningful increases will be focused where the market demands and on early to mid-career levels, he wrote. We are also increasing Annual Stock ranges by at least 25 percent for all levels 67 and below.

Its an odd time for some of the biggest companies in tech. While they still earn sizable profits, executives are curbing spending in the face of uncertain economic conditions. And yet they must also effectively grow and maintain their talent pools. The end result: hiring slowdowns, but bigger salaries for employees. For example, Amazon announced earlier this year that it would boost its maximum base pay for corporate and technology employeesfrom $160,000 to $350,000. And despite hiring slowdowns at their respective companies, Meta (formerly Facebook), Google and Apple have spent the past few monthslocked in a salary-boosting poaching war,especially in the white-hot arenas of augmented reality (AR), virtual reality (VR), anddata science.

In other words, these tech giants will continue to pay notably high salaries well into the future, no matter what the economic conditions. But in the meantime, it seems that cautious executives are engaging in a bit of belt-tighteningeven as they continue pouring cash into certain key projects.

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Microsoft Will Cut Back Open Jobs in Azure, Other Units - Dice Insights

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The TSX would be lower than 19,000 to start this week if not for the 6.57% advance of tech stocks in the last five trading days. While the sector is still deep in the red (-35.86% year to date), some of its constituents have positive gains already. However, tech giants like Shopify, Lightspeed Commerce, and Nuvei arent the rising growth stocks.

Absolute Software (TSX:ABST)(NASDAQ:ABST) and Softchoice (TSX:SFTC) are up more than 5% year to date, while Evertz Technologies (TSX:ET) is likely to turn green very soon. It seems their slump is over, and they could be the tech winners in 2022.

Absolute Software trades higher at $12.30 per share on account of a 10.81% advance in 10 days. While the trailing one-year price return is -28.15%, the year-to-date gain is now 5.33%. The $627.77 million dividend-paying company (2.64%) provides self-healing endpoint and secure access solutions to help customers strengthen their cyber resilience.

After three quarters in fiscal 2022 (nine months ended March 31, 2022), total revenue is US$144.8 million or 63% higher than in the same period in fiscal 2021. However, net loss reached US$19.1 million compared to the net income of US$6.7 million a year ago.

Christy Wyatt, Absolute Softwares president and CEO, said, We continued to deliver strong financial results in Q3, achieving record Enterprise and Government ARR growth and breaking the $200 million ARR mark. She added that Absolute is strongly positioned to address the challenges of endpoint-centric security posture in this next chapter of hybrid work.

Softchoice is an obscure name in the tech sector, but its a winner thus far in 2022. At $22.79 per share, current investors enjoy a 7.55% gain on top of a 1.58% dividend. The $1.35 billion company provides software-focused IT solutions that equips and trains customers to be agile and innovative.

In Q1 2022, management reported a 7.3% sales growth versus Q1 2021. Net income reached US$3.7 million compared to the $2 million net loss in the same quarter last year. Softchoices president & CEO Vince De Palma said, We experienced a solid first quarter of organic growth including double-digit growth in our Software & Cloud solutions.

For the full year 2022, Softchoice projects an 11% growth in gross profit to US$320 million. The margin of the adjusted EBITDA as a percentage of gross profit should be around 30%.

Evertz Technologies impressed investors with its earnings results for fiscal 2022. In the year ended April 30, 2022, revenue and net earnings increased 29% and 73% versus fiscal 2021. This $968.88 million company designs, manufactures and markets video and audio infrastructure solutions for the television, telecommunications and new-media industries.

Broadcasters, content creators, specialty channels and television service providers form the customer base of Evertz. This tech stock pays dividends like Softchoice, although the payout is more generous (5.66% dividend yield). Market analysts recommend a buy rating. They forecast the current share price of $12.71 (-0.83% year to date) to climb 28.5% to $16.33 in 12 months.

Absolute Software, Softchoice, and Evertz Technologies are proving more resilient than TSXs non-dividend paying tech giants. Would-be investors can earn from price appreciation and receive recurring income streams.

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None of the 3 Rising Growth Stocks Are Tech Giants - The Motley Fool Canada