Zoom’s Global Layoffs to Affect China Division

Zoom CEO Eric Yuan announced plans to lay off 1,300 employees, accounting for 15% of its global staff. According to Chinese media outlet Jiemian News, since the video conference application company stopped direct sales of new products and product upgrades in China last year, its current operations in the country are primarily focused on technical and product development.

A number of current and former Zoom employees have confirmed that the layoffs have already started in its Hangzhou, Suzhou, and Hefei offices. It is currently unknown if its Shanghai offices have begun to lay off staff. Several Zoom employees across these offices have confirmed a severance package of “N+4,” where N is the number of working years plus four months’ salary. Furthermore, restrictions on employee stock options will be lifted on August 9 of this year.

A software engineer from Zoom’s Hangzhou office reported having just received the memo on the morning of February 8, and immediately thereafter began the exit process. According to this employee, who had joined the company in April last year, Zoom has made great efforts to recruit talent in China over the past two years.

Eric Yuan was born in Tai’an, a city in Shandong province. Yuan’s hobby as a child was reading books. In 1996, he wanted to sell books online. However, at that time, transactions were processed through the post office. As he lacked a convenient method of collecting payment from customers, Yuan wanted to go to the US to learn how to efficiently operate an e-commerce business. Yuan’s visa application for the US was rejected eight times, and it was not until the ninth attempt that Yuan received approval to travel abroad in August 1997. Due to his poor English skills, Yuan relied on programming jobs in the US until 2002.

Yuan’s life in the US changed when Cisco, a US-based digital communications and technology conglomerate acquired WebEx, a web conferencing application developer, for $3.2 billion. Yuan was promoted to Vice President of Engineering at Cisco. He decided to start a business in 2011, and more than 40 engineers followed him to build Zoom.

As a video conferencing application, Zoom first gained popularity with its North American and European business sectors. The company entered China in 2013 and listed on the Nasdaq in April 2019. In 2022, it stopped selling new products and upgrading existing products directly to the Chinese market. Currently, its video conferencing services are provided through third-party partners. The company presently has four subsidiaries in China, three of which are direct subidiaries, including Hangzhou, Suzhou, and Hefei. Its Shanghai subsidiary is wholly controlled by a Hong Kong company called Zoom Video Communications Limited.

Over the past three years, the size of Zoom’s staff has more than tripled. According to data on its official website, in March 2020, the company had 2,500 employees worldwide, and this number rose to over 4,400 in March 2021. Before the layoff, Zoom had over 8,600 employees.

According to the CEO’s memo, all laid-off employees will receive 16 weeks (about four months) of salary and medical insurance, as well as year-end bonuses for 2022. The vesting period of restricted stock options held by US employees is six months, during which time the securities cannot be sold. Meanwhile, the restriction will be lifted for employees in other countries on August 9 this year.

In addition, Yuan took responsibility for the layoffs, promising to reduce his salary by 98% in 2023. The executive management team will reduce their salaries by 20% and foreit their 2022 bonuses.

SEE ALSO: Zoom Stops Direct Sales in China

The demand for remote work caused by the COVID-19 pandemic has brought significant changes to Zoom. Yuan mentioned in his memo that “the pandemic has permanently changed the growth trajectory of the company.” November 2021 can be regarded as a watershed moment in the company’s development, and its exponential growth phase has since passed. In 2021, the company’s annual revenue was $4.1 billion and the net profit was $1.375 billion, with year-on-year growth rates of 57% and 105%, respectively. Year-on-year revenue and net profile growth rates in 2020 were as high as 325% and 2987%, respectively. In the first three quarters of 2022, its revenue growth rate fell to 12%, 8%, and 5%, respectively.

Yuan wrote in his memo that mistakes were made during the company’s rapid expansion. The company did not thoroughly assess the impact and sustainability of scaling its workforce or whether the business was heading in the right direction. However, he stressed that people and businesses still rely on Zoom as we transition to a post-pandemic world. Considering ongoing uncertainty across the global economy, the company will continue to look inward, provide reliable services to customers, and realize its long-term vision.