California: Zoom Video Communications Inc. is eliminating 15% of its workers as the service that became ubiquitous during the pandemic adapts to slower growth.
The company will cut about 1,300 jobs as part of a restructuring, Chief Executive Officer Eric Yuan said on Tuesday in a blog post. Yuan called himself "accountable" for the company's issues and said he would reduce his salary and forgo his bonus.
"Our trajectory was forever changed during the pandemic," Yuan said, adding that Zoom headcount tripled in two years. "We didn't take as much time as we should have to thoroughly analyze our teams or assess if we were growing sustainably."
The reductions are a bigger share of the workforce than cuts announced at enterprise software companies including Salesforce Inc., Microsoft Corp. and Workday Inc. The shares gained 9.9% to close at $84.66 in New York, the biggest single-day jump in three months. Despite Tuesday's rise, the stock has plummeted 85% from an all-time high in October 2020 and is now at pre-pandemic levels.
While people and businesses continue to rely on Zoom in post-pandemic life, the "uncertainty of the global economy" is affecting customers, Yuan said. After gaining millions of users at the height of the pandemic, Zoom is now trying to reverse slowing growth by expanding its tools for business.
Still, it has reported single-digit revenue increases for the last two quarters, and analysts project that sales have continued to decelerate in the current quarter. The cuts are likely a bid to preserve or improve margins in the face of slowing growth, wrote Bloomberg Intelligence analyst John Butler.
Competition from Microsoft's Teams collaboration service has also become more of a concern for Zoom in recent quarters, according to industry analysts. In an interview with Bloomberg last month, President Greg Tomb acknowledged the competition, but said companies using Zoom rarely quit the platform. Tomb added the company's biggest opportunity is getting existing customers using the rest of its portfolio, which includes tools such as the Zoom phone service.
Yuan, the founder of the San Jose, California-based company, said his base salary, which was $301,731 last year, will be cut 98% and he will give up a corporate bonus for the current fiscal year. His total compensation for fiscal year 2022 was $1.1 million, according to a May 2022 regulatory filing. Others on the executive leadership will take 20% base salary reductions.
In late January 2020 "- before the Covid-19 outbreak was declared a national emergency in the US "- Zoom's headcount was about 2,500. It has since added about 6,000 people. The cuts announced Tuesday will reduce Zoom's total workforce to early 2022 levels.
The company expects to incur $50 million to $68 million in costs, largely due to employee severance, with most reported in the current period ending in April, Zoom said in a regulatory filing.