Zoom Video Communications Inc. is cutting 15 percent of its employees as the service, which became ubiquitous during the pandemic, adjusts to slower growth.
The company will cut about 1,300 jobs as part of a restructuring, Chief Executive Officer Eric Yuan said in a blog post on Tuesday. Calling himself “accountable” for the company’s troubles, Yuan said he would cut his salary and forego his bonus.
“Our course has changed forever during the pandemic,” Yuan said, adding that Zoom’s headcount has tripled in two years. “We haven’t taken that much time to thoroughly analyze our teams or assess whether we’re growing sustainably.”
The cuts represent a larger proportion of the workforce than cuts made at enterprise software companies such as Salesforce Inc., Microsoft Corp. and Workday Inc. were announced. Shares rose 9.9 percent to close at $84.66 in New York, the biggest one-day jump in three months. Despite Tuesday’s surge, the stock is down 85 percent from an all-time high in October 2020 and is now at pre-pandemic levels.
As people and businesses continue to rely on Zoom in post-pandemic life, “uncertainty in 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 slowed growth by expanding its tools for businesses.
Still, it has reported single-digit sales increases for the past two quarters, and analysts expect sales to have slowed further in the current quarter. The cuts are likely an attempt to preserve or improve margins amid slowing growth, Bloomberg Intelligence analyst John Butler wrote.
Competition from Microsoft’s Teams collaboration service has also become a bigger 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 leave the platform. Tomb added that the company’s biggest opportunity is getting existing customers to use the rest of its portfolio, which includes tools like 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 by 98 percent and he will forgo a company bonus for the current fiscal year. According to a May 2022 filing, his total compensation for fiscal 2022 was $1.1 million. Others on senior management will cut 20 percent of base pay.
At the end of January 2020, before the US Covid-19 outbreak was declared a national emergency, Zoom employed approximately 2,500 people. Since then, about 6,000 people have joined. The cuts announced on Tuesday will reduce Zoom’s overall workforce to where it was in early 2022.
The company expects to incur costs of between $50 million and $68 million, primarily from employee severance payments, with most reported in the current period through April, Zoom said in a regulatory filing.
