The downsizing of the global tech sector continues as payment gateway company PayPal Holdings Inc. announced its plans to reduce its workforce by around 7% or 2,000 employees. PayPal made the announcement on Tuesday, January 31st.
PayPal chief executive officer Dan Schulman explained in a statement that the layoffs are part of the company’s ongoing right-sizing process. By making the necessary adjustments to its cost structure, PayPal expects to focus its resources on its core strategic priorities. However, Schulman added that there was more work to be done in this case.
Unlike the recent drastic layoffs at Google, however, Schulman and his team put a human face on PayPal’s layoff process as the staff reductions will be conducted in tranches over the next few weeks. Ample compensation packages have been prepared for affected employees, and consultations will be provided to steer them into the transition process. Schulman also expressed his appreciation for departing staff and their contributions to the company.
Bracing Against the Impact of Inflation
This recent round of layoffs is further proof that PayPal is working to keep costs down in the face of inflation soaring to record highs in recent months. The company is also reeling from the way consumer purchasing has significantly dropped due to the possibility of an economic recession.
Indeed, PayPal’s share value fell by a staggering 60% over the past year and this was one of the key reasons that prompted the impending spate of removals. However, following the announcement of layoffs on Tuesday, the company’s share value rose by 2%.
Last November, the fintech titan reduced its annual revenue growth forecast, stating that it wasn’t expecting growth in its North American ecommerce business over the Christmas season. At the time, company executives opined that the less than ideal state of the macro environment and a general slowdown in ecommerce led to the adjusted forecast.
A Sad but Necessary Move
While the recent upheavals in the tech industry may cause grief and inconvenience among affected employees, experts say that this is a necessary move for firms if they want to stay relevant and operational throughout the ongoing economic crisis.
Wedbush analyst Moshe Katri, for one, opines that PayPal’s move to right-size its workforce is its way of bracing against an economic slowdown. By making its organization more compact and streamlined, it could move into a better position both strategically and financially.
For his part, Great Hill Capital chair and managing member Thomas Hayes sees these layoffs as a corrective measure on the part of tech companies that overhired throughout the pandemic. By putting their staff through what he calls a soft period, Hayes believes that tech companies will be able to sustain or improve their margins as the business sector recovers from the impact of COVID-19.