On December 4, cloud communications startup Twilio announced a 5% decrease in staff as part of its third significant wave of layoffs.
“While I know it’s hard to undergo so much change, it’s all part of the necessary transition to profitable growth,” Chief Executive Officer Jeff Lawson wrote in a memo to staff members on Monday, according to Bloomberg.
According to Lawson, sales people for Twilio’s contact centre software and consumer data platform are the main target of the layoffs. In addition, he mentioned the outcomes of earlier restructurings that “underachieved” in their attempt to assist these business units in achieving faster rates of growth.
Since September 2022, Twilio has let go of over 3,000 employees, which comes close to accounting for one-third of its entire employment for that year. Twilio’s stock dropped 1.1% in response to this news at 10:39 a.m. in New York.
In February of this year, a second round of layoffs with 17% job losses occurred as part of a reorganisation initiative to concentrate on profitability. Shares at that time increased 2% as a result of this action. In September of last year, the corporation implemented a first wave of reorganisation that resulted in the layoff of 11% of its personnel.
Additionally, Twilio disclosed in the petition that the firm may be charged between $25 million and $35 million for the layoffs. By year’s end, the most recent phase of reorganisation is expected to be completed. In addition, Spotify Technology SA said on Monday that it has initiated a third round of layoffs that will affect around one-fifth of its workers.
In the realm of creating software that enables companies to interact with their clients, Twilio is a well-known name. Nevertheless, the business found it difficult to sustain the rapid revenue growth and investor interest it had attained at its height. Twilio has disclosed that it will launch new artificial intelligence technologies for marketing services.
For More: News
Anson Funds, an activist investor, reportedly acquired a stake in Twilio last month and was pushing for the company’s complete sale or the division of the business unit that is the target of the cuts. This information was reported by the Information. The third round of layoffs that occurred recently have nothing to do with activist news, according to a Twilio representative. “Through the course of the last year, Twilio has been reorienting the business towards profitable growth,” he stated.
Twilio was founded with a set of application programming interfaces (APIs) that allowed for programmable text messaging and phone calls. More recently, the company has expanded by making major acquisitions, including SendGrid and Segment, to increase the range of products it offers.
Twilio CEO Jeff Lawson revealed in an internal memo to all staff members, “We made a strategic investment in go-to-market for Segment last year, anticipating growth.” Unfortunately, this hasn’t produced the expected outcomes, which has resulted in overspending. As such, we have taken the difficult choice to decrease some Segment go-to-market positions in order to better line our investment with the results we have seen.”
Additionally, due to modifications in sales tactics for Flex, a cloud-based contact centre for sales and customer support teams, several positions are being phased out or combined into the Communications division, resulting in changes in the marketing and finance sectors.
In February, Twilio underwent an organisational reorganisation that resulted in the division of the company into two separate business units: the communications division, which includes legacy components like transactional emails and messaging APIs, and the data and applications division, which houses more recent initiatives like customer data platforms and engagement apps.
The recent activist push on Twilio, most notably from Anson Funds, to sell or divest the data and apps segment raises the possibility that employees in this division are more vulnerable to the company’s continuous layoffs.
Lawson acknowledged this change by saying, “We’ve seen remarkable growth in Communications, but we’ve faced growth challenges in TD&A.” As a result, we’re adjusting our Flex plans and reallocating our investments in Segment, which unfortunately calls for a 5% layoff at Twilio.”
Although Twilio’s shares have increased 46% since December 2022, they have fared admirably over the past year and are currently in a relatively stable position. The corporation is valued at $12 billion after this turnaround, albeit far less than its peak share price during the 2021 tech boom.
Aside from other transitional assistance, affected employees will get compensation consisting of 12 weeks of base salary plus extra weeks based on years of service. Twilio estimates that this labour decrease will cost it between $25 and $35 million.