Layoffs or an AI pivot? It's hard to tell the difference now
Brendan McDermid/Reuters
- This post originally appeared in the Business Insider Today newsletter.
- You can sign up for Business Insider's daily newsletter here.
Am I getting laid off, or is my company announcing a big AI pivot?
These days, it's probably a bit of both.
A weird thing is happening in Corporate America. Companies are cleansing their layoff announcements with a healthy dose of AI strategy talk, writes BI's Tim Paradis.
Australian-American software company Atlassian was the latest to announce some AI-branded job cuts. When it laid off 10% of its staff, CEO Mike Cannon-Brookes said the move was part of Atlassian's repositioning in the "AI era." (You can watch his four-minute video explaining the layoffs here.)
The news comes a few weeks after Jack Dorsey laid off 40% of Block's staff while also pointing out that AI reshaped how the company could run.
Shedding staff because you're ushering in a new era of AI efficiency is a convenient bit of corporate magic.
Atlassian's stock was down more than 50% this year before the layoff announcement, a victim of the ongoing SaaSpocalypse. Block, meanwhile, was down more than 80% from its 2021 highs when it pulled the trigger on its cuts.
Block's Dorsey said blaming layoffs on overhiring during the pandemic "misses all the complexity."
The math does look simple here, though. Layoffs, which investors typically gobble up, and a sprinkle of AI reinvention can also be a sure-fire way to jumpstart a company that's had a tough run.
My colleague broke down another interesting theory on the recent job cuts.
Alistair Barr, author of the Tech Memo newsletter (are you really not subscribed yet?), wrote about another driving force behind these cuts: restricted stock units.
RSUs are the generous chunks of equity that tech companies use as part of their comp packages. It's a nice bit of financial engineering that works really well when business is booming.
But Alistair got an impromptu call from the CEO of a major public software company, who pointed out a red flag. The executive told him that RSUs are becoming a problem now that software companies' shares are nosediving.
Basically, the lower your share price, the more RSUs you need to issue to maintain the same comp level to entice and retain tech talent. That dilutes existing shareholders, which is no bueno.