At 10 am on Tuesday on Tuesday, staff from PayPal’s headquarters located in Blanchardstown and Dundalk were summoned at the last minute to attend an emergency meeting.
Then they received the news that nearly 300 would lose their jobs on July 12th.
Naturally, it was an unexpected shock since there was no warning or signals from the local area warning of anything amiss.
Certain PayPal staff members only heard about the cuts via the media. One employee said they were “confused and nervous.”
It is understandable that even though many industries have suffered massive damage over the last two years due to the Covid-19 virus, technology has shown incredible resilience and has pushed ahead.
All that changed was recent months as the grip of Covid-19 diminished and consumers were able to return to actual-world experiences like shopping.
PayPal is only one of many tech companies affected by that realignment and reassessment.
Informally, the company claimed that the decision to reduce its operations in this area was the outcome of a “review of the needs of its operations” and was taken in conjunction with changes to help expand its operations “to satisfy the ever-changing demands of its customers, and be and ready for the next chapter of expansion.”
In another way, it’s cutting costs to improve efficiency.
As with most tech companies, the payment provider online witnessed a rise in business amid Covid restrictions across the globe when many people were shopping from their homes, using their disposable income, which was accruing as they didn’t travel or have a social gatherings.
In 2020, the price of its shares soared 111% and increased by 25% more during the first half of the year.
Then it exploded, and, with inflation taking a toll on consumers’ spending, supply chains being disrupted because of the Ukraine conflict, and businesses losing at a faster than anticipated from its previous owner and its largest eBay customer, the fortunes of PayPal is now in reverse.
The shares hit their highest in July of the previous year. Its shares have dropped 73 percent of their value. They are now back to their December 2018 levels.
In an analyst conference call in April, the chief executive officer of the company, Dan Schulman, said that the company was pulling its medium-term perspective.
Mr. Schulman stated that 2024 is an unpredictably difficult year to project and said, “forecasting regular consumer e-commerce spending after we have gotten from the pandemic extremely complicated.”
PayPal is not the only company that has this problem.
Although the difficulties faced by PayPal have been extremely severe, their troubles aren’t unique to the tech industry, and the story has been repeated by a variety of other companies at different levels.
The tech-focused Nasdaq 100 index has been down by a quarter up to now, reflecting the deterioration of sentiment towards tech stocks that are widely believed to have been overvalued after they reached their highest point this year.
The downturn of the last few months has led experts to believe that we may be in danger of a tech-driven market crash like the one that exploded during the dot-com bubble in the late 1990s and the early noughties.
“US technology stocks have been vastly undervalued,” stated Peter Brown from Baggot Investment Partners.
“What you’re looking at is a twelve-year trend in purchasing everything that doesn’t have to earn money. It’s all about growth and momentum strategies and investors pouring into these stocks, and it has been a very profitable strategy for a long time. Even with Tesla being unable to make profits, and even with Amazon not earning any money, that mattered was.”
“You buy them because they’re always going up. The strategy was the case until December. Now, we’re seeing a major shift away from this strategy and into value. Some are saying, “This technology thing is done.”
“And it’s not just over for a moment. It’s all already. It is over. ever again.”
Tech stocks are also seen as particularly vulnerable to increases in interest rates used by central banks to deal with the rising inflation.
They are also dealing with other common problems that are more common, such as tightening of the labor market supply-chain shocks, higher costs, the loss of market share in the Russian market, fierce market competition, and fears of a recession.
The impact has been evident throughout those so-called FAANG companies: Facebook (now Meta), Amazon, Apple, Netflix, and Google.
Netflix had lost 2/3 of its value this year due to now losing subscribers after an enthralling few years when viewers stuck in their homes due to Covid restrictions joined in droves.
Amazon is also suffering but to a lesser degree. The price of its shares is down by a third following the losses of $3.8 billion in the first quarter, and its growth rates have slowed down to levels that were last seen in 2001.
Apple has survived the storm better than many and beat Wall Street’s expectations for its most recent quarterly earnings.
Even its share price has been pulled down by 20 percent this year due to the negative outlook, with the manufacturing supply chain problems in China impacting growth.
Google’s parent company Alphabet has suffered a loss of a part of its worth in the past year, following a less than the revenue forecast in the first quarter, with YouTube’s performance particularly disappointing.
The parent company of Facebook also beat analysts’ expectations during the initial quarter, despite gaining new users. Additionally, it was recently reported that it had implemented the hiring freeze for specific segments of its business even though its CEO Mark Zuckerberg has said that cutting jobs isn’t scheduled.
It will be an enormous relief for the three hundred Meta employees in Ireland and the 6,000 other Meta employees in the country who help support the company’s activities.
Are other tech companies able to cut jobs in this area?
However, the PayPal situation raises questions as to whether we may continue to see more lay-offs throughout the tech industry, in particular among the huge multinationals on which the economy is now dependent.
In different parts of the US and Europe, certain tech companies have also started to trim their workforces across the globe, including recent job losses at companies like Robinhood, Hopin, Klarna, Peloton, Netflix, and Fast Checkout, which closed down.
In this case, 162,000 workers were working within the Information and Communication Technology sector during the first three months this year, as per the Labour Force Survey released by the CSO this week. However, it was down by 4,000 compared to the prior quarter.
There is plenty to lose from any decline in technology.
However, those in direct foreign investment (FDI) aren’t concerned.
The IDA will be due to announce its mid-year numbers in July and has enjoyed solid first-half results, including a series of announcements of jobs, mainly in the technology sector.
Apple’s pledge last week to construct a new office building on the campus of Cork capable of accommodating up to 1,300 people is the latest instance of this.
The PayPal announcement is not considered yet to be the keystone in the coal mine, although that’s not entirely ruled out despite Ireland’s current status as a European technology hub.
Financial analysts agree that, despite the downward pressures on their stock prices, the core values of many tech companies are solid, and, if they are affected in any way, the employment rate in the tech sector could be the most likely one to get impacted by the slowdown in global economic growth as opposed to the end in the current tech share market rally.
“A number of these famous names did…spend an enormous amount and took on an astonishing amount of staff during Covid and the epidemic due to the demands they witnessed,” said Suzie Berkery, who is a senior stockbroker for Cantor Fitzgerald
“We’ve always believed that what’s happening in technology over the past few years is similar to the industrial revolution. We all know that everything is going in that direction. We’re buying these products, and we’re all using the same technology.”
“And it’s not changing. The pandemic hit us. Now we are on the verge of paying back that, and that supply chain problem is now a huge issue. However, is this a reason to be concerned or witnessing employees being fired? No.”
