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DigitalOcean waves goodbye to 11 percent of staff

The layoffs will continue until morale improves

Exclusive DigitalOcean on Wednesday told staff it was laying off about 11 percent of them, or approximately 200 employees.

A source within the cloud service provider told The Register about 100 employees were let go immediately and that the axe is hovering over another 100. Posts acknowledging the layoffs from some of those let go have already appeared on social media sites including LinkedIn.

A slide presented to employees at a meeting today suggests the biz hopes to avoid further staff reductions in the near future: "Our goal was to do this once so we would move forward towards business as usual again. Ongoing reductions are disruptive to the business and more importantly our employees, and we would like to minimize this as much as possible. There is no plan at this moment in time to conduct future reductions in force."

That is of course a non-binding aspiration.

In a presentation to staff, led by CEO Yancey Spruill, DigitalOcean management said about half the company's staff are based outside the US and about 70 percent of revenue comes from abroad. Consequently, the IT rental biz intends to prioritize global hiring in places like Pakistan and Mexico where relevant talent is available, and works for low wages compared to folks in some other nations.

DigitalOcean has also conducted a management reorganization. We're told the biz aims to reduce reporting layers across geographically dispersed operations and simplify its footprint by focusing on a few global hubs, referred to as "Global Capability Centers."

We've also heard that Carly Brantz, chief marketing officer for DigitalOcean will be departing on April 1, 2023, after three years with the company.

DigitalOcean did not immediately respond to a request to comment.

DigitalOcean, for its third quarter 2022 results, reported $152.1 million in revenue, an increase of 37 percent year-on-year, with gross profit of $97.6 million. The cloud firm is expected to report its Q4 2022 results on Thursday. On Wednesday, its share price closed up about 7 percent for the day.

While investors appear to respond positively to layoffs, based on the notion that staff reductions reduce expenses, various research papers suggest job cuts mostly don't improve financial results. As the Harvard Business Review noted in December 2022, "The majority of firms that conduct layoffs do not see improved profitability, whether measured by return on assets, return on equity, or return on sales."

Nonetheless, DigitalOcean joins the expanding parade of job cutting tech firms, which also on Wednesday included website hosting biz Wix and customer experience firm Sprinklr.

On Tuesday, CommerceHub, HackerEarth, PhableCare, and Udemy each let go of staff. On Monday, Twilio axed 17 percent of its staff, among other layoffs. ®

Updated to add on February 16

Today DigitalOcean, in its fiscal 2022 Q4 financial filing [PDF], said it recorded $163 million in sales, up 36 percent year-on-year, during those final three months. The quarter ended with a $10 million loss, though, but better than the $12 million a year-ago.

For the full year, revenue reached $576 million, up 34 percent, and losses deepened to $24 million from $19 million in 2021.

Our source was right that 11 percent of the workforce will be cut. This restructuring will cost between $25 million and $27 million. If you ever have a story to share, contact us in confidence.

DigitalOcean's stock price was up 7.6 percent to $35.50 today as of 1830 UTC.

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