Zoom and gloom: Vid-chat biz sheds 15 percent of staff – by email

CEO admits hyper-growth during pandemic was careless

Video chat outfit Zoom has "made the tough but necessary decision to reduce our team by approximately 15 percent and say goodbye to around 1,300 hardworking, talented colleagues" – and communicated it in an email.

The quote comes from the email CEO Eric Yuan on Tuesday sent to "Zoomies" – the firm's term for its staff. The missive was also posted online and includes Yuan's admission that "We know that getting this news by email is not ideal."

"We built Zoom to remove the friction that businesses felt when collaborating," Yuan wrote, adding: "Our trajectory was forever changed during the pandemic when the world faced one of its toughest challenges, and … we mobilized as a company to keep people connected."

"To make this possible, we needed to staff up rapidly to support the quick rise of users on our platform and their evolving needs. Within 24 months, Zoom grew 3x in size to manage this demand while enabling continued innovation."

But some of that hiring wasn't well considered.

"We didn't take as much time as we should have to thoroughly analyze our teams or assess if we were growing sustainably, toward the highest priorities," Yuan wrote.

The cuts will be made in job functions Yuan described as "overly complex or duplicative."

"As the CEO and founder of Zoom, I am accountable for these mistakes and the actions we take today," Yuan added, revealing that he's cut his own salary by 98 percent for the year and won't accept a bonus. "Members of my executive leadership team will reduce their base salaries by 20 percent for the coming fiscal year while also forfeiting their FY23 corporate bonuses," he added.

A regulatory filing [PDF] states the firings are part of a "restructuring plan" that's needed "to reduce operating costs and continue advancing the Company's ongoing commitment to profitable growth."

Shedding staff is the only element of the plan mentioned in the filing. Investors were warned the plan will lead to a charge of between $50 million and $68 million in Q1 2024.

Zoom reported $1.1 billion in revenue for Q3 2022, it's most recently reported quarter. Quarterly net income fell from $340 million from Q3 2021's $48 million, with stock-based compensation expenses a major factor in that turnaround.

When announcing the results, Yuan pledged "an increasing emphasis on efficiency and profitability."

Clearly that focus eventually sharpened onto 1,300 Zoomies.

Zoom thus joins the ranks of prominent tech companies shedding thousands of staff, often in response to plague time over-hiring. The vid-chat business can also point to having the toughest business challenge in tech: fighting Microsoft when it decides not to settle for second place in a growing market. For Zoom that meant competing with Teams even as that collaboration tool was bundled alongside stuff Microsoft customers had already paid for. ®