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Amazon’s hardware team first faces the ax as tech giant scales back

It was to make about 10,000 “role removals” shortly after Andy Jassy announced the “most difficult” decision in his short tenure as CEO of Amazon. The ax began to turn on the company’s low-margin, costly hardware division.

According to several employees contacted by the Financial Times, the team working on the Alexa voice assistant, the Kindle ereader and the Halo health-tracking device has followed the technology giant’s “routine” for one of the layoffs taking place this month. was one of the first teams to be announced. ” reviews its performance annually.

“It’s no surprise we decided to start there,” said one employee on the Kindle team. “What’s unclear to any of us is whether it ends there.”

Amazon’s dismissal comes as part of a broader technology sale and job cuts in the space. But there are idiosyncratic complaints from Wall Street about Amazon’s management doing little to tame a workforce that has doubled during the pandemic.

The move is aimed at meeting investor demands to boost profitability in the company, whose capital has fallen from $1.8 trillion a year ago to $940 billion today. The wave of job cuts is focused on costly corporate and tech jobs, rather than warehouses and fulfillment centers that make up the bulk of the global workforce of 1.5 million.

    Amazon CEO Andy Jassy at a summit in Seattle, Washington, USA
Amazon Chief Andy Jassy: “Our annual planning process will be extended into the new year. This means more role reductions will be made as leaders continue to adjust.” © David Ryder/Bloomberg

It’s not yet clear where all 10,000 roles will be lost, and the number of job cuts could fluctuate around that number, according to people familiar with the company’s strategy.

In a note to staff, Jassy suggested that even sacred cows such as online stores could take a hit in the coming months. Hiring freezes have already been implemented company-wide.

“They are significantly overweight and should adjust for the holidays,” said Jefferies analyst Brent Till, suggesting investors expected broader rate cuts. .

“Hardware doesn’t really make a difference.

Investors are increasingly looking at Amazon’s global operations with concern, said Jim Tierney, chief investment officer at AllianceBernstein, which owns about $4.5 billion of Amazon’s stake.

Reduce the number of technical staff by 2022

“The big question investors have is what will happen to international business,” he said, adding that supply chain tensions and inflation had taken their toll on global e-commerce growth in the last reported quarter. You mentioned an operating loss of $2.5 billion.

“Will investors have the same patience for international operations? Especially when it’s much more decentralized and has a much lower market share compared to the US?” added Tierney.

Sales from Amazon’s online stores fell from $106 billion to $102 billion in the first half of the year, but rebounded in the third quarter, thanks in part to the rescheduling of Prime Day. Still, overall revenue growth, which includes cloud, slipped to 7.3% in his first two quarters this year and his 7.2%, the lowest rate in more than two decades.

Amazon Courier Delivering Parcels in San Francisco, USA
Job cuts are focused on costly corporate and tech jobs rather than warehouses and fulfillment centers, which make up the bulk of Amazon’s global workforce © David Paul Morris/Bloomberg

In a note later posted on Amazon’s corporate blog, Jassy set the stage for more drastic layoffs for the remainder of this year and into next year.

“Our annual planning process will be extended into the new year, which means more roles will be cut as leaders continue to adjust,” he wrote. “These decisions will be shared with affected employees and organizations in his early 2023.”

The threat created fear and tension within the company. More than 20,000 employees participate in discussion channels on our internal communication tool, Slack, to share their layoffs, learn the fate of other colleagues, and offer advice on next steps. increase.

Complicating the effort, however, was that some of the laid-off employees had seen their access to internal systems cut off, prompting them to set up a separate group on the messaging app Discord. It’s what happened. Amazon said affected employees continued to have access to the tools they needed to find new jobs within the company.

According to employees, the hardware team bore the brunt of the first layoffs. Amazon’s Worldwide Digital division, which is dominated by Alexa, is set to lose $10 billion this year, according to documents obtained by Business Insider. Amazon declined to comment on the numbers – it didn’t detail how the company’s devices performed in its quarterly results.

The Alexa voice assistant device is a best-seller at the company’s Prime Day sale event, but it’s usually heavily discounted. What started as a passion project for Amazon founder Jeff Bezos, the Alexa team has yet to solidify the lucrative utility of the device as it was intended. Users regularly use only a fraction of the approximately 30,000 Alexa “skills” (uses) created by Amazon and external developers.

More recently, high-profile innovations such as the $1,000 home robot Astro have raised eyebrows within the company, said one current employee. That said, as part of an effort to grab more of the smart home category, Amazon announced in October that he would buy iRobot, the company behind his Roomba robot vacuum cleaner, in a deal worth $1.7 billion. agreed to acquire

Insiders said Jassy seemed less attached to Alexa than Bezos because he was looking for broader savings.

“Management continues to emphasize that they are still investing heavily in Alexa. I think,” said a current employee on the Alexa team. “We’re losing too much money.”

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