Zoom Slashing Workforce by 15 Percent, CEO to Take 98 Percent Salary Cut

Communications firm Zoom announced plans to lay off more than 1,000 employees globally after a pandemic-fueled growth spurt and subsequent decline, with the chief executive announcing a 98 percent reduction in his salary.

“We have made the tough but necessary decision to reduce our team by approximately 15 percent and say goodbye to around 1,300 hardworking, talented colleagues,” stated a Feb. 7th message to Zoom employees from CEO Eric Yuan. “We did not take a single departure lightly—our leadership carefully examined and made decisions based on critical priorities for long-term growth, and also looked for functions that have become overly complex or duplicative.”

Laid off workers in the United States will get restricted stock units (RSUs) and stock options vesting for six months. For non-U.S. employees, these benefits will exist through Aug. 9. RSU refers to an award of stock shares usually granted to employees as a form of compensation.

Zoom’s share price jumped close to 10 percent on Tuesday trading. Though shares are up more than 20 percent year to date, its price has declined by more than 40 percent over the past year.

Pandemic Growth, CEO Salary Cut

Zoom grew rapidly during the COVID-19 pandemic as companies shut down offices and remote working became widespread, thus boosting the need for the firm’s videoconferencing solution.

In his message to employees, Yuan says that the company grew three times its size in a period of 24 months during the pandemic to meet the rising demand.

But now in the post–pandemic world, workers have returned back to offices and employees are engaging in more in-person activities.

“The uncertainty of the global economy, and its effect on our customers, means we need to take a hard—yet important—look inward to reset ourselves so we can weather the economic environment,” Yuan said.

Yuan announced that he is reducing his salary for the coming fiscal year by 98 percent as well as foregoing his fiscal year 2023 corporate bonus. Members of his executive leadership team will take a 20 percent salary hit while also forfeiting their bonuses.

Yuan made more than $300,000 as salary for the fiscal year ended Jan. 31, 2022, according to The Wall Street Journal. He also made $13,000 as a non-equity bonus plan. Yuan is estimated to be worth $3.9 billion.

Zoom has previously come under scrutiny for its ties with China. In December 2020, for example, court documents filed by U.S. federal prosecutors had shown that a Zoom executive worked with Chinese authorities to transfer data of users located outside of China in order to ensure that the company retained market access in the Asian nation.

Positive Third-Quarter Revenues, Mass Job Cuts

The layoffs come even though Zoom posted positive results in the third quarter. The firm saw third-quarter total revenues of $1.10 billion, up 5 percent year over year. Enterprise revenue was at $614 million, up by 20 percent.

The number of customers contributing more than $100,000 in trailing 12-month revenue had risen by 31 percent. Zoom reported third-quarter generally accepted accounting principles (GAAP) operating margin of 6 percent and a non-GAAP operating margin of 34.6 percent.

As of Jan. 31, 2022, Zoom had roughly 6,800 employees, up from 2,500 workers in 2020. Zoom is scheduled to reveal its fourth-quarter results on Feb. 27.

Zoom joins a host of other tech firms that have also announced mass layoffs in recent days. On Feb. 7, for example, e-commerce firm eBay said that it plans to lay off 500 workers globally, which comes to 4 percent of the company’s workforce.

In its filing with the U.S. Securities and Exchange Commission (SEC) on Feb. 6, Dell Technologies declared that it intends to cut down its workforce by roughly 5 percent as the company faces an “uncertain future.”

According to employment analytics firm Challenger, Gray & Christmas, Inc., American companies announced laying off 102,943 in January 2022, which is more than twice the number of terminations in December and the largest number of layoffs since September 2020.

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