> Stock rises after company announces broad restructuring plan focused on driving ‘profitable growth’
Could someone explain how layoffs lead to stock rises in layman terms?
Could someone explain how layoffs lead to stock rises in layman terms?
Company lays off 7500 people, saving ~$1.5B / year in payroll / benefits / office space / etc.
Company takes one-time ~$1.5B charge for severance and other layoff costs.
Investors believe company will see ~$1B more net profit in subsequent years, assuming 10% staff reduction can be absorbed with little profit impact.
Share price reflects NPV of future profits, so stock rises.
Eventually someone with a brain would realize they are hemorrhaging money and hire the guy back full time and even make it look like he was never laid off for 2 years contracting so he would keep his seniority benefits. My coworkers with 20+ years said this happened over and over again. I left and everyone was laid off in 6 months…
But often it’s just boardroom machinations for various reasons that can change as quickly as the weather.
I know people who made a good living being the layoff/callback dude for years. Basically considered it a 3-6 mo vacation every couple years. “Oh you want me to come in to consult? I’m in the Bahamas- it’s gonna costya”
That's hilariously inefficient. I would be mad if I were a shareholder in this business, but good for those employees in question who were savvy.
The trick is understanding when part of the company is genuinely not contributing, and since things are complicated, what other parts are entangled and need to be adjusted as part of the plan.
Just randomly laying off x% is like randomly removing x% of code to improve performance. It’s going to produce more pain than gain.
For example I believe they were working on some sort of solution for managing NFTs.
Do you think those colleagues didn't contribute anything as far as their job title?
Having said that the number one thing Salesforce should culturally do is put more focus on what it's customers need. It is a sales and marketing organization, which it is very very very good at. But you can't just keep up by upselling stuff to customers. If you don't keep your customers happy, all this WLB doesn't really help.
https://www.thedailybeast.com/salesforce-is-ditching-its-awk...
I don't know what percentage is too much, all I know is that the stock market is not the economy, and things that tend to be good news for workers and main street tend to be bad for the stock market. For instance, in the past ~6 months the labor market continues to be strong reporting many job openings, which is good for workers as this allows them to seek higher-paying wages. But the market went down after each report because it meant that JPow would further increase interest rates, which are bad for the majority of businesses since they don't have positive free cash flows and rely on zero interest rates to continue operating with debt.
We've been living in the upside down for a while now. And gravity is coming back :)
Also, sometimes I suspect that the market moves on news -- not because the news actually affects some prospects so much -- but because some other people can make money on the movement, and the news is just an excuse/tool.