Roku Becomes The Most Recent Company To Resort To Mass Layoffs
Roku has announced that it will be laying off 5% of its workforce in the face of a downturn in advertising revenue.
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Roku is cutting 200 jobs, becoming the latest tech company to announce layoffs. In an SEC filing, Chief Financial Officer Steve Louden cited the current economic conditions for the decision which affects 5% of its overall workforce. As a result, the video-streaming device maker will pay between $28 and $31 million for the reductions, primarily because of severance payments, notice pay, employee benefits contributions, and related costs.
They said most of the Roku layoffs will happen in the fourth quarter. The remaining cuts are expected to be complete by the end of 2023’s first quarter. “Taking these actions now will allow us to focus our investments on key strategic priorities to drive future growth and enhance our leadership position,” the company said in a statement. The job cuts come after the digital media player manufacturer beat Wall Street estimates on the top and bottom lines for the third quarter.
In leadup to the Roku layoffs, the company issued a weak outlook amid inflationary pressure and an ad-spending slowdown, warning investors that it expects total net revenue of $800 million in the next quarter. This would represent a decline of 7.5% year over year, Variety reports. “This is not a normal holiday season,” CEO Anthony Wood said, alluding to the Roku layoffs.
“The macroeconomic headwinds are creating a tremendous amount of uncertainty,” he added. And the first thing companies do when that happens is cancel their ad budgets. As a result, some of Roku’s largest advertisers are not spending with anyone at this point, which has left the company with no choice but to implement Roku layoffs. The company had already begun taking steps to slow the rate of hiring and reduce operating expenses.
But it will a few more quarters for its growth rate to normalize, amid the Roku layoffs. As of December 31, 2021, the California-based tech company had approximately 3,000 full-time employees located in 13 countries. In pre-market trading last Thursday, its shares were down by more than 3%. Meanwhile, Roku added 2.3 million active users in the third quarter, compared with 1.3 million net additions last year.
Like the Roku layoffs, several tech and media companies have announced mass employee shifts in recent weeks. This includes Warner Bros. Discovery, Disney, Paramount Global, Amazon, Snap, Spotify, Twitter, and Meta. Meta retrenched 11,000 employees last week, with Amazon and Microsoft expected to follow suit very soon. Twitter CEO Elon Musk, also dropped half his workforce after acquiring the social network in October. And Netflix laid off around 300 people in June.
With all of tech sector shifts, including the Roku layoffs, for now, Apple has remained an exception. But the iPhone maker did impose a hiring freeze which is expected to continue into late 2023. Disney has also paused hiring and is anticipating job cuts, Engadget reports. The mass cuts across the industry come as streaming-focused companies face the dual challenge of an uncertain economy and a revenue decline following a boom during the global pandemic. Roku’s Chief Financial Officer, Steve Louden will also leave the company sometime in 2023, unrelated to the Roku layoffs, Reuters reports.
