Zoom, which rose to prominence during the quarantine with its video conferencing tools, has seen its growth slow.
Zoom Video Communications Inc said it will cut about 1,300 jobs and take up to $68 million in related costs as demand for video conferencing services slows as the pandemic subsides.
The company’s shares, which fell 63 percent last year amid a slump in tech stocks, closed up 9.9 percent on the news but fell slightly in extended trading.
As he announced the layoffs on Tuesday, which will affect nearly 15 percent of the workforce, Chief Executive Officer Eric Yuan said he would take a 98 percent pay cut for the coming fiscal year and forgo bonuses.
“We worked tirelessly… but we also made mistakes. We didn’t take as much time as we should have to thoroughly analyze our teams or assess whether we are growing sustainably, according to the highest priorities,” Yuan said.
Zoom will charge about $50 million to $68 million in costs related to the layoffs, according to a regulatory filing on Tuesday. The company said a significant portion will be spent in the first quarter of fiscal 2024.
The company, which became a household name during the quarantine due to the popularity of its video conferencing tools, has seen slow revenue growth.
Analysts forecast Zoom’s revenue to grow just 6.7 percent in fiscal 2022 after a more than four-fold jump in revenue and a nine-fold increase in profits in 2021. Profits are estimated to have fallen 38 percent in 2022.
“I would say gradually, maybe that tells us that we shouldn’t expect a re-acceleration in the near term on the revenue side, but we could see additional margin growth for a company that is already profitable,” RBC Capital Markets analyst Rishi Jaluria said.
Zoom ramped up hiring during the pandemic to meet rising demand, but is now joining U.S. companies in reining in costs to prepare for a potential recession.
A host of U.S. companies, from Goldman Sachs Group Inc to Alphabet Inc, have laid off thousands this year to weather a slump in demand caused by high inflation and rising interest rates.
The video conferencing software maker also said its executive team would cut its base pay by 20 percent over the same period.
The departing employees will receive 16 weeks’ pay, health insurance and a bonus for the year, Yuan said.