Prominent Minneapolis tech analyst and investor Gene Munster expects a lot more layoffs at big tech this year after saying those companies have been hiring too aggressively in recent years.
In addition to the recently announced rounds of job cuts, he thinks tech companies could further cut another 15-20% of their workforce over the next three months to a year.
“At the end of the day, these companies still have far too many employees,” Munster said.
But it won’t happen all at once, he said, noting that companies can also freeze hiring, with around 10% of their workers changing each year through attrition.
“They’re going to do it slowly,” he added.
Munster has closely followed Apple, Google and other big tech companies for decades. He was a long-time financial analyst at Piper Jaffray before branching out in 2017 to create a venture capital firm, Loup Venures, with two other partners.
That company, which became Loup Funds, was renamed this week to Deepwater Asset Management to better reflect its broader focus of also investing in public companies. With a continued focus on technology-driven growth companies, he now has about $200 million in assets under management, Munster said.
The name “Deepwater” comes from the idea of deep thinking, but is also a nod to the 10,000 lakes around Minnesota, where company executives decided to keep the company.
“We love this place and want to build a sustainable, multi-generational business here,” he said.
Currently a 10-person company based in Uptown, Munster says he hopes to add a few more employees this year with a longer-term goal of becoming a multi-billion investment firm with a team of 30-50 people.
While overall layoffs in the United States remain at fairly low levels, the tech sector has been one of the few industries to see significant downsizing in recent months, grabbing headlines.
In 2022, tech companies announced about 97,000 layoffs, nearly a quarter of all job cuts last year, according to consultancy Challenger, Gray and Christmas.
Alphabet, Google’s parent company, Microsoft and Amazon are among those who have each announced job cuts of 10,000 or more workers so far this year.
Munster said he was surprised at how quickly most big tech companies, with the exception of Apple, have grown their workforces over the past three years, often keeping pace with their 50-to-50 revenue growth. 80% over the same period.
“It’s a pretty remarkable rate of growth – and equally remarkable the rate at which they were hiring,” he said.
Many tech companies were confident that growth would continue, but that clearly has not been the case, Munster said.
“I think the mistake that was made is that these companies continued to hire at breakneck speeds into 2022,” he said. “Now they need to start reversing that.”
Meanwhile, Munster said Apple, which hasn’t announced any recent layoffs, has been hiring at a more appropriate pace, increasing its staff by about 20% over that time. That means Apple can slow down its hiring instead of having to lay off people, he said.
As for tech workers who have recently been out of work or may soon be out of work, Munster said he thinks they won’t be looking for work for long, especially more than other industries such as financial services and manufacturing focus more on technology. .
“People who are laid off can be valuable to many types of businesses,” he said. “So I think they will be quickly picked up.”
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