- The CEO said growth is unlikely to “go back to what it was before.”
- Meta has entered a new era, Zuckerberg tells analysts in a conference call.
- The company cancels several data center projects.
Mark Zuckerberg spotted the cost-cutting blunder.
During a phone call with Wall Street analysts discussing Meta’s fourth-quarter results, Zuckerberg said his new push for “efficiency” in 2023 was inspired by how much better the company was after November’s mass layoffs and other measures such as office closures appeared to be cutting off. The improvement was “unexpected,” he added, and made him realize the company had entered a new era.
“For the first 18 years, I think we increased it by 20%, 30% compound or a lot more every year, right? And then obviously that changed very dramatically in 2022 where our earnings were negative for the first time in company history,” he said. “We don’t expect it to continue, but I don’t think it will either will definitely go back to how it was before.”
“It was a quick phase shift, stepping back and saying, ‘Okay, we can’t treat everything like it’s hypergrowth,'” he added. “We now have a lot of things that a lot of people use and that support a lot of business, and we should work a little differently.”
To that end, Meta, formerly known as Facebook, is planning further cost cuts this year. Referring to last year’s 11,000 layoffs, Zuckerberg made it clear that this move “was the beginning of our focus on efficiency and there would be more steps to come.”
Closure and merger of offices
One of the additional steps is the closure and “consolidation” of more offices. It cost the company $2.2 billion last year to end a number of key leases as Meta decided to continue allowing remote work on a full-time basis. Desk sharing will be introduced this year as the California, Seattle and New York offices are closing. For example, the Instagram office space in San Francisco will be closing this year to be merged with the Facebook headquarters building, also in San Francisco.
Susan Li, Meta’s new CFO, said during the call that the company would incur an additional $1 billion in rent-exit-related costs this year. She also pointed out that “further costs from restructuring efforts” are possible.
Employees expect more layoffs
That could come from a new round of layoffs. Staff are bracing for another 5% to 10% headcount reduction as performance reviews conclude and Zuckerberg says he intends to “flatten” the reporting structure. He said Wednesday the company was removing “some layers of middle management,” noting that Reality Labs, which is building a metaverse, was not safe from further cuts. Many managers have already lost their jobs, as Insider reported. Fourth-quarter layoffs cost the company $975 million, Wednesday’s release.
“What makes you a better company over time is the ability to run and do more because you’re more efficient,” Zuckerberg said. “We are now in a different environment where, in many things that we do, it makes sense to focus much more than before on efficiency and ensuring we can operate effectively. For what it’s worth, I think it’s going to be a more enjoyable place to work for people because they can get more things done.”
Cancel multiple data center projects
Meta also canceled several data center projects, incurring $1.3 billion in associated costs. These efforts will continue through 2023. Li said the same operational “check” applied to other areas of the company also targets data centers.
Building and maintaining data centers is typically a huge expense for any large tech company, despite many tax incentives provided by state governments for hosting them. Meta is rolling out a whole new architecture for its data centers, Li said, giving the company the ability to leverage them for AI and non-AI needs and workloads. The company did not disclose which current data centers will be closed or impacted by the design changes. The goal, however, is that data centers simply cost the company less money.
“It will be cheaper and faster to design,” Li said of the new center’s architecture. “And we will streamline our overall approach to building data centers.”
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