Headlines of layoffs in the tech sector continue to roll in. Today’s latest contributor to the revolving door that is the U.S. technology sector is Okta (NASDAQ:OKTA). This latest round of Okta layoffs will affect around 400 employees, with the company cutting around 7% of its staff in this latest cut.
Notably, this move follows a previous round of layoffs a year prior. The company is seeking increased profitability and the ability to invest in its core high-growth segments.
January can be a month in which investors notice an uptick in layoff announcements, and many companies wait until after the holidays to finalize their plans for the fiscal year. Let’s dive into what the company’s CEO said about this round of layoffs and what could be ahead for the ID verification firm moving forward.
OKTA Stock Higher on News of Okta Layoffs
Okta’s CEO Todd McKinnon recently released a memo, which was addressed to his employee base. A snippet of his commentary worth considering is:
“After a thoughtful FY25 business planning process, the leadership team and I have made the difficult decision to implement a workforce reduction impacting about 7% of our company, or approximately 400 people … In order to grow profitably, we need to run the business with greater efficiency. While we’ve taken steps in the right direction, the reality is that costs are still too high. We need to be mindful of our overall spend so we can continue to invest in the areas, products, and routes to market with the most opportunity. To capture our massive potential and build an iconic company, we must be thoughtful about where we place our bets. This action is a proactive measure to help set the company up for long-term success.”
In other words, it appears Okta is in search of a more streamlined business model, with more attention and focus likely to be paid to key business segments with the “most opportunity.” This step was noted to be proactive, meaning Okta’s current business operations appear to be on the right track. However, it’s clear that investors are demanding profitability, and Okta’s negative earnings numbers are increasingly becoming a focus for the company’s management team.
Overall, today’s market reaction to this news isn’t surprising. Investors are seeking greater efficiency in this current market. Accordingly, I think we’ll unfortunately see more of these announcements in the near future.
This news is terrible for existing employees, and most readers will empathize with those who lost their jobs today. However, investors taking an analytical approach appear to be in buying mode on the news.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
