Zuckerberg’s sleeve cut to Wall Street ended in tragedy: welcome to the biggest retreat analysts have seen in years

About 2 weeks ago, Mark Zuckerberg made a famous cut of sleeves investors, who demanded cost cuts. The play went incredibly wrong: caused a crash in the market capitalization of Facebook’s parent Meta.

The young and billionaire founder of the social network has not taken long to learn the lesson. A few days ago, Zuckerberg announced 11,000 layoffsabout 13% of the company’s workforce.

This should save Meta billions of dollars in a move that is expected, as Business Insider He has been reporting for weeks that important labor adjustments were coming in the sector.

What has really surprised Wall Street have been the other measures that Zuckerberg has put on the table:

  • Goal has extended the hiring freeze policy until the first quarter of 2023.
  • Zuckerberg now plans to hire fewer employees next year.
  • The company lowered your spending forecast by 2023 at 2,000 million dollars (1,990 million euros), a change that occurred just 2 weeks after presenting a higher budget.
  • It also lowered the top range in the capex bracket, cutting another $2 billion.

Analysts at investment bank Jefferies have named these Meta swings: Zuck U Turn.

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It is a play on words that refers to the expression fuck you turn which, being soft, can be translated as sending someone for a ride. A) Yes, Zuck U Turn alludes to the fact that, finally, those who have gone for a walk have been Zuckerberg and his plans to increase spending in the metaverse without taking into account the opinion of investors.

These analysts have explained, on the other hand, that the cuts made by the CEO of Meta in terms of employment company profits will increase without necessarily affecting the trajectory or the growth of the company.

“Meta and Zuckerberg have clearly heard the massively negative investor reaction to the perceived lack of cost discipline,” Mark Mahaney, internet analyst at ISI Evercore, said in a note to investors.

Mahaney has been one of the leading analysts in the technology sector for more than a decade, specifically since the times of the 2008 crisis. This means that he has seen everything or almost everything in terms of business collapses and unexpected turns.

With everything and with that, he explains, this change of policy Zuckerberg ranks at or near the top of drastic business course alterations: “This is the biggest turnaround we’ve ever seen in a span of just 2 weeks.”

For Zuckerberg, Meta and all silicon valleythis is another sign that the time of abundance and favorable investment is coming to an end.

Zuckerberg was until now the prototype volatile tech founder who made decisions quickly without caring to break with established concepts but, in return, generated massive wealth for Wall Street venture capitalists for many years.

While the boom lasted, few investors questioned his decisions. But Meta shares started plummeting last year and, in the last 12 months, it has lost 71% of its value.

Meta is now worth about $250 billion, less than Home Depot, a company that basically sells wrenches and flower pots. Apple is worth 8 times more.

In this somewhat more modest new order of things, Meta is becoming more thrifty. So instead of building lavish offices for its pampered tech workers, the company has said it’s trying to reduce its real estate footprint.

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It’s even forcing some employees to share desks. Some benefits have also been reduced and, according to last Wednesday’s announcement, more changes in cost reduction are coming soon.

“This will mean a significant cultural change in the way we operate“, Zuckerberg has warned his employees. For Wall Street, all this has come 2 weeks late, but better late than never.

“Deep changes are hard – the era of dollars for all created a bad culture,” Brad Gerstner, a major Meta shareholder at Altimeter Capital, tweeted on Wednesday, calling the moves “an important first step.” by Zuckerberg and the Meta board of directors.

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Zuckerberg’s sleeve cut to Wall Street ended in tragedy: welcome to the biggest retreat analysts have seen in years