In a call with Wall Street analysts, Mark Zuckerberg discussed Meta’s fourth-quarter results. He highlighted the new push for “efficiency” in 2023, which was inspired by the improved performance of the company after the November layoffs and other cost-cutting plans. Zuckerberg referred to the improvement as “unexpected” and acknowledged that the company has entered a new phase.
Zuckerberg also acknowledged the change in the company’s growth rate, noting that it will not go back to the way it was before. He emphasized the need for the company to operate differently, as it now supports a large amount of business and has many widely used products.
To this end, Meta (formerly Facebook) is planning to continue reducing costs this year. Zuckerberg mentioned the 11,000 layoffs from last year and indicated that these layoffs were only the start of the company’s focus on efficiency. He made it clear that there will be additional steps taken to cut costs and improve efficiency.
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Zuckerberg emphasized that the company’s focus on efficiency is not a response to the slowdown in growth, but rather a recognition that the company has entered a new era. He explained that the company cannot continue to treat everything as if it were still in a hyper-growth phase.
Office Closures and Consolidations
Meta is streamlining its operations through the closure and consolidation of multiple offices. In the previous year, the company incurred expenses worth $2.2 billion to exit various major leases as it decided to stick with full-time remote work. This year, desk sharing is being introduced and offices in California, Seattle, and New York are set to close. For instance, the Instagram office in San Francisco will be merged with the main Facebook office building in the same city.
Financial Implications
During a recent call, Susan Li, Meta’s new CFO, indicated that the company will face another $1 billion in charges related to lease exits this year. She also cautioned that there could be “further costs from restructuring efforts”. Please note that this information is not guaranteed to be accurate, and you should verify it with other sources.
Employees Anticipating More Job Cuts
It’s possible that there will be another round of layoffs. As performance evaluations are completed and Zuckerberg discusses the plan to “flatten” the company’s reporting structure, employees are preparing for a reduction in headcount ranging from 5% to 10%. Zuckerberg stated that the company is “removing some layers of middle management” and warned that even Reality Labs, which is developing a metaverse, is not immune to further cuts. Several managers have already lost their jobs, as reported by Insider. The cost of layoffs in the fourth quarter was reported to be $975 million.
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Zuckerberg stated that “What makes you a better company over time is being able to execute and do more because you’re operating more efficiently. We’re in a different environment now where a lot of what we do, it makes sense to focus on efficiency a lot more than we had previously and make sure we can work effectively. I think it will be a more enjoyable place for people to work as they can get more things done.”
Termination of Multiple Data Center Initiatives
Meta has taken the decision to cancel a number of its data center projects, incurring charges of $1.3 billion in the process. This trend will persist into 2023. The CEO, Li, stated that the same level of operational “scrutiny” being applied to other sections of the company is being directed toward data centers as well.
Constructing and maintaining data centers is a significant cost for large technology firms, despite the various tax incentives offered by state governments to host them. Li mentioned that Meta is implementing a brand new architecture for its data centers, enabling the company to use them for both AI and non-AI purposes and workloads. The specific data centers that are being closed or impacted by the design modifications were not revealed by the company. The objective is to lower the cost of the data centers.
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“The new center architecture will be faster and more cost-effective to design,” said Li. “We are also looking to optimize our overall strategy for building data centers.”
