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Salesforce ‘hired too many people,’ will lay off 10 per cent of workforce

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Salesforce Inc said it plans to cut jobs by 10 per cent and close some offices, after rapid pandemic hiring left it with a bloated workforce amid an economic slowdown.

The cloud-based software firm said on Wednesday the job cuts would lead to about $1.4 billion US to $2.1 billion in charges, while only about $800 million to $1 billion will be recorded in the fourth quarter.

Companies like Meta and Amazon have slashed thousands of jobs in the past year, in preparation for a recession, expected as a result of aggressive interest rate hikes by global central banks to curb inflation.

Salesforce Canada employs 1,800 people and has offices in Toronto, Vancouver and Halifax, according to its website. When contacted by CBC News, the company would not say whether its Canadian operations and employees are impacted by the layoffs.

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Salesforce had 73,541 employees at the end of January 2022, a 30 per cent jump from 2021.

‘We hired too many people’

Businesses that relied on cloud services during the pandemic are now trying to reduce expenses and are delaying new projects, hurting companies such as Salesforce and Microsoft Corp.

“The environment remains challenging and our customers are taking a more measured approach to their purchasing decisions,” Salesforce co-chief executive officer Marc Benioff said in a letter to employees.

A close-up of a bearded man wearing glasses.
Marc Benioff, chairman and co-CEO of Salesforce, attends a session at the 50th World Economic Forum annual meeting in Davos, Switzerland, on Jan. 21, 2020. (Denis Balibouse/Reuters)

“As our revenue accelerated through the pandemic, we hired too many people leading into this economic downturn we’re now facing, and I take responsibility for that.” Its shares were up about 3 per cent on Wednesday. They lost roughly half their value in 2022 as Salesforce posted four consecutive quarters of slowing growth.

“It (the company) is certainly not alone as the sector has grappled with a demand environment that has meaningfully softened over the last 12 months,” William Blair analyst Arjun Bhatia said.

The move puts Salesforce in a good position to meet its 2026 target of 25 per cent operating margin but the macro backdrop could pose risk to its $50 billion US revenue target, Bhatia said.

“There is high likelihood of right-sizing by other software firms,” RBC Capital Markets analyst Rishi Jaluria said.

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India’s Adani’s losses swell above $100bn – Al Jazeera English

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  1. India’s Adani’s losses swell above $100bn  Al Jazeera English
  2. Mobius Says Adani Debt ‘Scared Us Away’ From Share Sale  Bloomberg Television
  3. Adani’s Abu Dhabi Investor Says IPO Funds Have Been Returned  BNN Bloomberg
  4. Adani-Hindenburg: Short Seller’s Masterclass in Financial Globalization  Bloomberg
  5. The Adani crisis  The Financial Express
  6. View Full Coverage on Google News

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U.S. Federal Reserve delivers small interest rate hike, signals a ‘couple’ more increases necessary to tackle inflation

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Federal Reserve chair Jerome Powell speaks during a news conference at the Federal Reserve Board in Washington on Feb. 1.Jacquelyn Martin/The Associated Press

The U.S. Federal Reserve increased its benchmark interest rate by a quarter percentage point on Wednesday and signalled that a “couple” more rate hikes are still needed to bring inflation under control.

The widely anticipated announcement lifted the federal funds rate to a range of 4.5 per cent to 4.75 per cent. The quarter-point move is the smallest increase since the central bank began ratcheting up borrowing costs last spring in an effort to curb surging prices.

After a string of oversized rate hikes, the U.S. economy has begun to slow and inflation is showing signs of easing. Fed chair Jerome Powell said on Wednesday that “the disinflationary process has started,” although he warned that it would be “very premature to declare victory.”

“While recent developments are encouraging, we will need substantially more evidence to be confident that inflation is on a sustained downward path,” he said in a news conference after the rate announcement.

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While the Fed was unambiguous that “ongoing increases” in borrowing costs are still necessary, financial markets responded positively to Mr. Powell’s relatively optimistic comments about inflation and the U.S. economy.

The S&P 500 finished the trading day up 1.05 per cent, while the Nasdaq Composite surged 2 per cent. Bond markets also rallied, with the yield on two-year U.S. government bonds falling around 0.1 per cent. Bond prices and yields move in opposite directions.

“While previous statements said the Fed would have to determine the pace of future rate rises, today’s statement indicated it will now have to determine their extent,” Desjardins economist Francis Généreux wrote in a note to clients. “Rate hikes aren’t over, but it may be the beginning of the end.”

Members of the Federal Open Market Committee, the Fed’s highest decision-making body, which sets U.S. monetary policy, signalled in December that they expect the fed funds rate to exceed 5 per cent by the end of the year. That would imply at least two more quarter-point hikes.

Mr. Powell reiterated this forecast, although he said future rate hikes would be conditional on incoming economic data. He also pushed back against market expectations that the Fed could start cutting interest rates this year. Interest-rate-swap contracts are pricing at least two rate cuts before the end of 2023.

“The historical record cautions strongly against prematurely loosening policy. We will stay the course, until the job is done,” Mr. Powell said.

The Fed’s insistence that more rate hikes are still needed puts it on a different trajectory than the Bank of Canada.

Last week, Canada’s central bank increased its benchmark rate to 4.5 per cent, but said it expects to hold off further rate hikes. This “conditional pause” suggests that Canadian rates have reached a plateau while U.S. rates will keep marching higher.

The Canadian economy is generally seen as being more sensitive to interest rates than the U.S. economy, given how much of the Canadian economy relies on the housing sector. Canadian mortgages also tend to have five-year terms, compared with 30-year terms in the United States, making homeowners more susceptible to rate increases.

What happens next to U.S. interest rates will depend on the trajectory of inflation as well as the strength of the country’s labour market.

There are plenty of signs that inflation is trending in the right direction. The annual rate of consumer price index inflation in the U.S. was 6.5 per cent in December, down from a 40-year high of 9.1 per cent in June.

Prices for many goods, such as used vehicles, have fallen in recent months, as supply chains have improved and consumer demand has shifted back toward services. Mr. Powell said he also expects housing-related inflation to diminish in the coming months.

The challenge is service prices, excluding housing, which show few signs of decelerating. This is tied in part to rapid wage growth, which is being driven by the ultralow levels of unemployment, which stood at a record low 3.5 per cent in December.

Mr. Powell said unemployment will likely need to rise to slow the pace of service price growth. He expects this to happen in the coming quarters as higher rates work to slow the economy. Although, he suggested that a soft landing was still possible.

“There’s a path to getting inflation back down to 2 per cent without a really significant economic decline or a significant increase in unemployment,” he said.

The European Central Bank and the Bank of England will announce their latest interest-rate decisions on Thursday. The central banks are behind the Bank of Canada and the Fed when it comes to tightening monetary policy, and both are expected to announce further half-point rate increases.

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ChatGPT to launch paid version of AI tool for $20 US a month

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The intelligence embedded in ChatGPT may be artificial, but the creators of the wildly popular chat bot are hoping it can do something humans strive for all the time: make money.

OpenAI, the company that created ChatGPT, will soon roll out a paid version of the service in a pilot project, where people willing to spend $20 US a month will get a premium version of the product.

Starting soon, customers in the U.S. who sign up for the program will get preferential access to the service, even at peak times of demand, when many users are currently locked out.

They’ll also get faster response times for their queries, and priority access to new features and improvements as they roll out.

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The subscription service will only be available to U.S. users for the time being.

Wildly popular service has its critics

The service has taken the world by storm since its launch in November, becoming the first viral mass-market artificial intelligence tool.

But ChatGPT is not without its critics. Detractors have already waved red flags about the service’s potential to lead to job losses, as well as being a haven for plagiarism and cheating.

In a blog post, the California-based company says it is also exploring other options for its business, including lower-cost plans, communal subscriptions for corporate clients and data packs.

But the free version is here to stay, they say.

“We love our free users and will continue to offer free access to ChatGPT,” the company said. “By offering this subscription pricing, we will be able to help support free access availability to as many people as possible.”

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