- CEO to cut own pay by 98% as axe falls on workforce
- Zoom grew too fast, too quickly, and made ‘mistakes’
- Investors send stock up 10%
That Zoom Video Communications (ZM:NASDAQ) stock surged nearly 10% overnight is telling, another indicator that investors believe ‘pandemic winners’ overinvested and are now having to cut their cloth accordingly.
Zoom attracted thousands of users when we were all stuck at home during Covid lockdown, but it became the latest tech company to swing the jobs axe as growth evaporates in a more normal world. Chief executive Eric Yuan said in a blog post that the business would reduce 15% of its employees, or roughly 1,300 jobs, from right across the business.
SURGE HAS STALLED, STOCK HAS SLUMPED
In Yuan’s view, Zoom grew too fast, too quickly during the pandemic, expanding three-fold to manage demand, and mistakes were made. Between the March quarter of 2020 and the equivalent period in 2019, Zoom revenues surged from a little more than $188 million to $882.5 million, and hit $1 billion by the August 2021 quarter.
That saw the share price surge nearly 750% from $66 to $559 during 2020’s first nine months, but as growth has stalled, so the shares have fallen, and fallen hard. At the start of January 2023, investors could buy the stock for roughly $66 again, eradicating all the Covid gains before this year’s tech rally.
Zoom closed overnight at $84.66 after the 10% rally.
Revenue has barely moved for five consecutive quarters while earnings have declined more than 21% from their pandemic peak.
SEARCHING FOR SUSTAINABLE GROWTH
Zoom believes it didn't take as much time as it should have to thoroughly analyse its teams or assess if it was growing sustainably. As a result, while the company said businesses continue to rely on Zoom post-pandemic, the economic uncertainty, and its effect on Zoom customers, means it needs to reset to weather the economic environment.
In a rare example of senior executives sharing the strain, Yuan said he will not take his fiscal 2023 corporate bonus, and he plans to slash his own salary by 98% for the upcoming year. Other Zoom executive leadership team members will see 20% cuts to their base salaries for the coming fiscal year ( to January 2024) while also forfeiting last year’s bonuses.
Total revenue for the year to January 2023 is expected to be between $4.37 billion and $4.38 billion, the company has previously said, flat year-on-year.
