FireEye announced layoffs for cost control
Earlier in this series, we discussed FireEye’s (FEYE) falling billings growth and its lowered guidance for 2016. Along with its 2Q16 results announced on August 4, 2016, FireEye announced its restructuring plan. Its restructuring plan involves laying off ~10% of its workforce, or approximately 400 employees.
Technology companies often resort to layoffs to keep a tab on costs. FireEye intends to achieve the same. It plans to save ~$80 million in annual expenses through restructuring. In early 2016, its peer Symantec (SYMC) also announced a restructuring plan, which involved laying off 10% of its workforce as well as the closure of some facilities.
Technology companies’ dependence on layoffs to control costs
In late April 2016, Intel (INTC) announced that it would slash ~12,000 jobs. The above chart shows the largest layoff announcements in the computer industry from 2012 to 2016, as reported by Challenger, Gray & Christmas, which is an employment consulting firm.
For technology companies, employee costs form a significant part of operating expenses, which explains why technology companies often resort to layoffs to reduce costs. During 1Q16, technology companies axed 17,002 jobs, an increase of 148% compared to 1Q15.