[bastawhiz]

If meta needs to lay off tens of thousands of people to make their financials look good enough to appeal to investors, that suggests to a layman like me that they weren't turning enough profit per employee to justify the things those people are working on. This comes, notably, after raising $10B last year before the layoffs.

So besides stock buybacks, what does it actually mean "to build a more traditional balance sheet and fund some expensive initiatives"? Layoffs mean they're doing less (far less!). Are they gonna hire people back? Like, what are you funding if it's not the people doing the initiatives?

And a follow-up question: given the above, who exactly is buying these bonds? "We grew too fast and did too many things so we fired people. Now our numbers look good! Give us money like last year to hire people to do things!" sounds like Lucy encouraging Charlie Brown to kick the football, no?

[arcticbull]

They definitely were making tons of profit per employee.

They've consistently been making $1.2-1.6M in revenue per employee, and their net profit margin has been 20-40%.

They just thought they could make more money.

[edit] I think Patrick McKenzie did a great job of explaining the post-COVID layoffs on Odd Lots a few months ago [1], as saying that companies hired to (a) keep the lights on with a ton of new users (b) tracking the growth trendline assuming things wouldn't return to normal and (c) they didn't see the ordinary 6% annual attrition baked into HR expectations due to employee uncertainty.

So from that perspective, a bond offering seems fine, IMO. Better than a dilutive secondary offering.

[1] https://www.youtube.com/watch?v=Hb7G7sY4p9o

[kevin_nisbet]

Layoffs may not be applied equally though. When you get into big company spaces, they tend to be closer to an amalgamation of a bunch of smaller companies / empires. So layoffs may target business units that are not performing as well as the average, or the bet isn't working out. On the flip side though, there might be other units that require very different skills and experience that the investment in is getting doubled down.

And for raising debt, a factor is it's usually much easier and cheaper to raise debt when you don't need to. This one applies to startups as well, you're in pretty bad shape if you're low on money and need to raise capital. So if the conditions are right, it's worth it to raise now if the conditions are right, even if you're not going to start torching it for a couple of years.

[thoughtstheseus]

Facebook is now a cash cow making $40 billion of EBITDA and $20 billion of net income annually. They have ~$20 billion of net debt or about one years worth of earnings.

Debt investors likely believe the company can handle a higher debt load.

[roncesvalles]

>Layoffs mean they're doing less (far less!). Are they gonna hire people back?

Layoffs were mostly recruiters and PMs. New hiring will be mostly SWEs.

[tootie]

Compare to Apple who has been crazy profitable but who opted to pile up a cash hoard. Meta and Google and some others saw every spare billion as an opportunity to hire another moonshot team to build AI/VR robot cars. All that stuff was funded by their main businesses. Now they are basically giving up. Stick to their core businesses and just keep the cash.

[vineyardmike]

To be fair, apple is famous for having poured money into AR and robot cars lately. “Project Titan” was a cash burning machine, and we’ve been expecting their rumored AR goggles any day now.

Apple may have had more discipline with hiring, but they definitely fund R&D ventures - especially the “moonshots” you mention. They seem to have avoided any crypto teams, and any space-tech teams, but they also seemed under invested in AI.

[jsnell]

Meta wasn't just pouring money into moonshots. They returned $45 billion to shareholders in 2021 and $28 billion in 2022, via stock buybacks.

[jmiskovic]

My hunch is that the massive layouts across IT sector are caused by GPT suddenly becoming useful and viable. We are approaching times when replacing humans with robots on such scales will trigger a public outcry, so this was the last opportunity to shed away some tens of thousands of organic brains.

[0zemp2c]

they lay off because they can

they issue bonds because they can

its smart - as money flees iffy industries like banking, it will be looking for a safe home...big tech will have no issue attracting capital

the only real danger is big tech getting extremely overbought, creating another systemic risk

[ProAm]

> Layoffs mean they're doing less

This isn't true, it means they had fat to trim. People that were under performing or working on nothing. There was a hiring arms race the last several years and everyone over hired fearing other companies would get talent first. The industry at most of the notable tech companies was bloated.

[gabea]

They are not exactly trimming 'fat'. This latest round had numerous people who were getting high marks and even AE. There is some meme going around that this was a performance based layoff and it absolutely was not.

[vineyardmike]

Trimming the fat is about organizational fat. Some teams could be bloated, or unnecessary, etc.

I don’t know what went on in meta, but a few years ago I worked on a product team in a tech company. That team had a dedicated sub-team who reworked our AWS hosting every year. The company had a full Dev-Ops team to do it for us. Those 4-5 people were just making busy work and design docs in their name. While I’ve since quit and moved on, i hear that team experienced layoffs this spring. That’s “fat” which can be trimmed even if the engineers are very capable people.

[djbusby]

What's AE?