IDK. Tech companies are bringing in more revenue than ever. The trend seems to be companies reporting great revenue growth, then laying off shortly after, to which the investors seem to reward. In the past, layoffs would usually bring stock prices down, since they have less human capital to generate profit from.
Revenue and profit are different things. In times of low interest it’s growth at all costs. Investors love market share and growth, because they expect to make money when they sell their shares. That’s risky, but with low, no, or even negative interest it’s still worth the risk.
When interest goes up, parking money in safe, interest-based forms of investment becomes more interesting, so to compete companies also need to lower the risk. In a climate like that investors want to make money via dividends, so companies need to maximize dividends and to do so they need to maximize profits. Growth, market share and future plans become less relevant.
The layoffs are usually due to a race to meet quarterly projections; when the projections slip, the fastest way to match them again is layoffs. And for companies to keep their stock prices up, quarterly numbers have to keep climbing.
IDK. Tech companies are bringing in more revenue than ever. The trend seems to be companies reporting great revenue growth, then laying off shortly after, to which the investors seem to reward. In the past, layoffs would usually bring stock prices down, since they have less human capital to generate profit from.
Revenue and profit are different things. In times of low interest it’s growth at all costs. Investors love market share and growth, because they expect to make money when they sell their shares. That’s risky, but with low, no, or even negative interest it’s still worth the risk.
When interest goes up, parking money in safe, interest-based forms of investment becomes more interesting, so to compete companies also need to lower the risk. In a climate like that investors want to make money via dividends, so companies need to maximize dividends and to do so they need to maximize profits. Growth, market share and future plans become less relevant.
That’s what we are seeing right now.
The layoffs are usually due to a race to meet quarterly projections; when the projections slip, the fastest way to match them again is layoffs. And for companies to keep their stock prices up, quarterly numbers have to keep climbing.