In late October, tech companies experienced a dark week. The valuation of all GAFAMs has fallen, so much so that the Financial Times estimates the decline at nearly $800 billion. In words ? A combination of factors related to the slowing economy and rising costs for many organizations.
The world of technology is evil. For several months, many companies have laid off all or part of their workforce. Most of the time, these are startups or unicorns. This is mainly due to the fact that these organizations spend a lot, are not necessarily profitable and rely on fundraising to bring in the money needed to keep the accounts afloat. Problem? Investors are much more cautious than before and less easily put money on the table. Today they ensure above all the profitability of a company before investing.
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Amazon, Google and Microsoft in turmoil?
The first to suffer the horrors of this black week is Amazon. Indeed, the e-commerce giant is unlikely to meet the targets thought by analysts who previously estimated that the company would generate $155 billion in profits in the last quarter of 2022. This is the most strategic period for Amazon. , as it includes Black Friday, the second Prime Minister’s Day (which took place in October), as well as the holiday season.
Today, analysts estimate that Amazon should generate 140 billion dollars in the country. This announcement is coupled with the fact that revenues from the cloud (and therefore from the AWS entity) are slipping, with customers having to cut costs en masse as well. It was enough to send the e-commerce giant’s rating plummeting. Amazon’s stock lost almost 9% of its value in a month and fell 14% in just 5 days.
Microsoft and Google are facing the same issues: rising energy costs have a direct impact on their business as data centers are very energy intensive. Also, consumers are obliged to make savings as they face the increase in the price of energy and raw materials. Thus, advertising and cloud services are less profitable.
Between Tuesday and Wednesday, Microsoft shares lost 7.74% of its value. Despite an improvement on Friday, October 28, the stock of the firm founded by Bill Gates has lost almost 18% of its value over the past 6 months. As for Google, it’s down 7.5% on the NASDAQ on Black Tuesday, October 25. On the other hand, it is in the long term that the decline in valuation is most impressive. Since the start of the calendar year, or January 3 for the New York Stock Exchange, the company has lost 33% of its value.
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Meta shares fall, Mark Zuckerberg’s fortunes suffer
The biggest drop is attributed to Meta. Indeed, the group formerly known as Facebook has suffered greatly from the strategy of its founder, Mark Zuckerberg, to invest everything in the metaverse. It must be said that 10 months after the launch of Horizon Worlds, Meta’s metaverse, some rooms remain desperately empty. As mentioned by Thomas Pontiroli, journalist of Les Echos, the company was counting on 500,000 monthly users. Today there are about 200,000.
threshold highlights the catastrophic figures of Meta’s metaverse, which is only accessible through the group’s virtual reality headset: Quest. Last quarter, the Reality Labs division lost nearly $3.7 billion. Over the course of the year, that’s almost a 10 billion loss in this department, while the Quest 2 helmet has seen its price increase by $100 at the same time, a very aggressive price that turns many customers away.
In total, Meta will have planned to spend 10 billion dollars a year, for 10 years, on this project that attracts no one. However, the group aims to make Horizon Worlds available on PC, Mac, tablet and smartphone by the end of 2022, specifying however that the experience will be greatly reduced.
These phenomena are added to some other economic factors that are harming Meta’s business. While Facebook is losing audience and is no longer attractive to TikTok, Instagram is trying to reinvent itself. And all this without forgetting the various scandals like Cambridge Analytica.
Since Mark Zuckerberg’s wealth is directly related to Meta’s good financial health, he equally suffers the pain of his leader’s risky decisions. Since the beginning of the year, Meta shares have lost 70% of their value. The company’s value is now $266 billion. Mark Zuckerberg came out of the top 10 richest people in the world. Currently at 26e country, his wealth is estimated at 38.2 billion dollars. He lost $87.3 billion in one year.
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Apple, only GAFAM to resist
Smartphone manufacturers are also going through tough times. Indeed, several factors are pushing customers to rethink their phone purchases: greater product sustainability in the market, environmental awareness, aggressive price increases… As a result, manufacturers’ revenues are all down, except for Apple, which sees its turnover increase by 2%.
However, all is not rosy in apple land. Indeed, iPhone 14 orders are slowing. The firm had planned to speed up production to offer a large quantity of smartphones. At the end of September, just a few days after the release of the new model, Apple decided to cancel the order made with its manufacturers.
On the part of the manufacturers, problems are also appearing: the increase in the price of energy, the lack of electronic components… Some devices are becoming complex to buy, this is especially the case with the PlayStation 5. Apple is doing relatively well despite everything.. During Black Tuesday, the apple brand lost only 1% of its value. However, since January, Apple shares have fallen 14%.
Layoffs expected at GAFAM?
This is the question everyone is asking. Indeed, Google has already halted its recruitment to conduct one the number of persons. It must be said that large companies, growing rapidly, hired them with a vengeance. Today, they understand that some people are not necessarily in the right position or that some recruitments are simply not necessary.
In France, some startups are starting to ask questions about hiring, faced with the difficulty of raising funds. In the United States, the trend is more toward layoffs. In total, in technology, nearly 45,000 people lost their jobs in 2022 alone.