Job cuts: Amazon's hardware teams go first

Not long after Andy Jassy declared that the "hardest" decision he would make in his short tenure as Amazon CEO would be cutting about 10,000 jobs, the ax fell on the company's costly and margin-heavy hardware divisions placed.

After the tech giant's "routine" annual review of its business results, the teams working on the Alexa voice assistant, Kindle e-reader and health-tracking device Halo have been the first to be informed they're among the layoffs this month, as several employees contacted by the Financial Times report.

A member of the Kindle team explained, "It's hardly surprising that they chose to start there. Whether it ends there, none of us knows."

Amazon's layoffs are part of a larger downsizing in the tech industry and a sell-off, but Wall Street's chief complaint is how little Amazon management is doing to control its workforce, which has more than doubled during the pandemic, a move

designed to meet investor demands for greater profitability of the company, whose capitalization fell from $1.8 trillion to $940 billion last year.Instead of being concentrated in the warehouses and fulfillment centers, which employ the vast majority of the world's 1.5 million employees, thewave of layoffs in high-paying positions in the corporate and tech industries

According to a person associated with the company's plan men is familiar with, it is still unclear where all 10,000 jobs will be cut and the actual number of layoffs may vary slightly from this estimate.

Even sacred cows like the online shop could be attacked in the coming months, Jassy's email to workers said. A hiring freeze has already been imposed for the entire company.

According to Jefferies analyst Brent Thill, "They are extremely overweight and need to trim for the holidays," meaning investors were expecting deeper cuts.

"The hardware isn't really going to change the world. Measured against the total number of employees, that's really a rounding error. For it to really matter to Wall Street, it has to go much deeper.

According to AllianceBernstein Chief Investment Officer Jim Tierney, the Holding a nearly $4.5 billion stake in Amazon, investors are increasingly concerned about the company's global

operations, citing its $2.5 billion operating loss last quarter, which was caused by supply chain stress and inflation adding, "The big question investors are asking is what's going to happen to the international company."

Will investors have the same tolerance for global companies, especially given how dispersed they are? and how much smaller their market shares are than in the US? Terney digged in.

In the first half of the year, sales in Amazon's online store fell from 106 billion .to $102 billion before staging a comeback in the third quarter, due in part to the postponed Prime Day. In the first two quarters of this year, total revenue growth, including cloud, was 7.3% and 7.2%, the lowest in more than 20 years.

In his memo, which Amazon later published on its official blog, Jassy laid the groundwork for more large-scale layoffs over the course of this year and next.

There will be more job cuts because "our annual planning process continues into the new year," he added. "These decisions will be communicated to the organizations and employees affected by them in early 2023."

The company is very concerned about this threat. More than 20,000 workers have joined a discussion channel on internal news platform Slack to share they have been fired, find out what has become of other colleagues, or offer advice on how to proceed.

However, the process was complicated by the fact that some of the laid-off employees lost access to internal systems, prompting them to create backup groups on messaging software Discord. Amazon said affected workers still had the tools they needed to find other employment within the company.

Employees claim that the first layoffs were mostly in the hardware teams. According to a memo obtained by Business Insider, Alexa and the rest of Amazon's Worldwide Digital division are expected to lose $10 billion this year. Amazon declined to comment on that amount because its quarterly results don't include information on how its gadgets are performing.

While Alexa's gadgets are often heavily discounted, they were the most popular items during the company's Prime Day sale. The team behind Alexa, which began as a side project for Amazon founder Jeff Bezos, has yet to find a financially worthwhile use for the gadget. Only a small subset of the approximately 30,000 Alexa "skills" (applications) developed by Amazon and external developers are commonly used by users.

One employee explained that newer technologies that made headlines, such as B. the $ 1,000 home robot Astro, had sparked internal debates about their potential applications and the likelihood of finding a wide audience. In October, in a bid to expand into the smart home market, Amazon decided to buy iRobot, the maker of the Roomba vacuum cleaning robot, for $1.7 billion.

Insiders claim that Jassy is less committed to Alexa than Bezos as he seeks further savings.

A recent member of the Alexa team said, "Leadership keeps emphasizing that they're still aggressively investing in Alexa, which I believe is true, but I think they've just overinvested given the current economic climate." There are too many financial losses.