The investor, who runs the hedge fund Scion Asset Management, several months ago predicted a rout in the tech sector marked by waves of mass layoffs of white-collar workers. The news cycle has proved him correct since most tech groups are relying on job cuts to adapt to the economic downturn.
For example, Meta Platforms (META Get Free Report , parent of Facebook, WhatsApp and Instagram, cut 11,000 jobs in November, a first since the group was created in 2004. Amazon (AMZN Get Free Report has just said it would cut 18,000 jobs, much more than the initial estimate.
Burry’s criticism unsurprisingly spawned many comments on Twitter. Some commentators pointed out to him that cutting jobs is good for the software giant’s bottom line.
“They weren’t producing revenue — goes straight to net income,” commented Monolith Technologies CEO John S. Boyd. “Stock should be up.”
“Bad bet Burry. Job cuts just creates more efficiency and more profits for shareholders. I do not own any CRM but you get what I’m saying,” added another Twitter user.
But other Twitter users agreed with Burry and questioned the effectiveness of the cost-saving measures on Salesforce’s future performance.
“CRM is on the way to years of decline. Competition is catch up, along with the market declining,” one Twitter user agreed.
“What’s stunning is that these big SV companies come bumbling in with massive layoffs that will have zero impact operationally. It’s quite stunning that they just woke up post C19 & all do it at the same time. Maybe so they won’t be seen as ‘mean?'” said another Twitter user.
Burry Has a Solid Track Record Burry generally does not and here did not respond to comments.
In the third quarter, Salesforce reported a Wall-Street-beating bottom line of $1.40 a share as demand for its workflow solutions remained solid. Revenue rose 14% year-over-year to $7.84 billion, essentially matching analysts’ estimates.
The company’s remaining performance obligation, a tally of its total deferred revenue and product backlog and a key industry metric, rose 11% to $20.9 billion.
The 2008 financial crisis, one of the biggest financial debacles in history, made Burry a legend. It made him one of the examples to follow in the defiance of standard practices in financial circles.
The 2015 film “The Big Short” describes how the investor, who had no particular expertise in finance and real estate, came to understand that the sector had become a sand castle. Financiers and bankers created exotic products based on mortgages given to financially fragile households and borrowers with poor credit.
He therefore decided to bet on the collapse of the subprime mortgage market — hence the name “Big Short.” History proved him right. Since then, Burry has become something of a Wall Street oracle.