The company’s layoff strategy is the first step?4 Questions for Investors

As the economy slows, businesses are laying off employees to cut excess staff, restructure/refocus activities, and put future growth ideas on hold, he said. Layoffs make sense given the seasonal downturn in Q1, but investors need to answer four questions to understand what happens next.

Question 1 – Why are you laying off now?

Companies usually prefer to shift their employees to different locations. After all, they are loyal, dedicated, and proven employees. Moreover, it is humane. Add to that the ongoing challenge of hiring qualified recruits today, and it seems like a smart corporate move. It is a red flag to make this issue a top priority for .

Question 2 – Why are there such massive layoffs?

Some companies have defended massive layoffs, saying they represent only a small fraction of their total workforce.For example, MicrosoftMSFTMore
(from new york times Article, “Microsoft lays off 10,000 employees as it appears to cut costs”):

“The company plans to lay off 10,000 employees, cutting costs amid economic uncertainty and refocusing on priorities such as artificial intelligence,” said Satya Nadella, Microsoft’s chief executive officer. is trying to guess

“Microsoft had approximately 221,000 employees at the end of June, representing a reduction of less than 5% of our global workforce.”

But that excuse, which appears to undermine action, overlooks the cumulative ramifications of laying off a town-sized population of 10,000. Moreover, the two reasons seem contradictory. “Refocusing” means shifting resources, unless it involves closing large, unprofitable areas. “Trimming” means cutting costs everywhere. Like, for example, the classic mandate that he cut positions by 5% in all departments. That’s a good explanation for 10,000 people receiving a pink slip, but it’s also a warning to Microsoft shareholders.

Question 3 – Why do I have so many layoffs?

“Refocusing” is not a common reason, and “economic uncertainty” looks like the best answer. If that’s the main reason, investors should see these multiple layoffs as a warning sign for the stock market.

But there is a derivation of this question: Are there hidden answers? Are there undiscussed hidden motives? increase. Ltd. Magazine article, ‘Is this the real reason Googlegoog
,AmazonAMZN
Facebook [Meta]and is Microsoft doing layoffs?”:

“Is the current wave of big tech layoffs really intended as a way to weaken the confidence of tech workers and give them a stronger bargaining position with employers? That’s what some tech industry observers believe, including John Cook, who is the deputy reporter Maxwell Strachan.

“Google, Amazon, Facebook and Microsoft are laying off a total of 51,000 employees. The reason given in each case is the same, almost verbatim -word. After the pandemic, we experienced increased demand and expanded our workforce to meet that demand. With the slowing economy and changing markets, we realized we had mistakenly hired too many people. We have to put that right by firing some people.

“What if it was all a big lie? What if the real reason for the layoffs is the leaders of big tech companies who are tired of catering to the whims of their ever-increasingly sought-after engineers and data scientists? Were you able to put these technicians in their place by making them afraid of their jobs?”

Yes, that’s the conspiracy theory version. Its importance is not its feasibility, but simply its existence. Therefore, question 3 requires an understandable and reasonable answer.

Question #4 – What comes after these layoffs?

It’s hard to imagine a return to the good times, just because of the cutbacks. Perhaps each job cut is just the first step in restructuring the company for what’s next. When it comes to “refocusing,” companies are less likely to talk about their future growth vision, and more about their core strengths (healthy financials, increased productivity, stable margins, favorable earnings, dividend growth, etc.). will tell Further layoffs, layoffs, spin-offs and divestitures are expected to drive that change.

Then there’s an important and meaningful big step. It’s about building a new foundation for growth. Doing so means a throwaway quarter of negative behavior in most cases. The goal is to clean the house by removing the excess left over from the books.

Importantly, analysts and fund managers understand and welcome these rare times. They know that future quarters can be very attractive once the ugly quarters are over.

Bottom line – don’t rush this reconstruction period

Fed action aside, we are still shrouded in a fog of uncertainty and risk. Most of the 2021-2022 stock craze has reversed, but the rest remain. Many equity investors still falsely hope for a return to the previous growth environment. Fixed income investors are reminded that bond prices will need to drop significantly to get some higher long-term yields. The next thing to learn is how credit risk affects even stable bond markets. Then all the lessons have been learned about good times ploys designed to look safe while generating outsized returns.

So think cash first. Now money market funds are paying him a “huge” return of over 4%. Yes it’s still below CPI inflation but it’s a lot closer than the almost 0% yield a year ago and more importantly that his 5% yield getting the money market back to normal That’s it. This has not been seen 15 years ago since 2007. The holders of these trillions of dollars in short-term investments are expected to do very well from their due fair ground. They again receive a stream of earned income paid by users of capital (borrowers of all kinds, especially the US government and large corporations), all of which flows into the financial system and economy.