The latest: China’s internet giant Tencent Holdings Ltd. (0700.HK) will reduce its workforce by at least 10% across all business groups, including middle and junior management, as well as older employees, a media report said.
Looking up: The report cited internal sources saying that the platform and content business group, which was the hardest hit by layoffs in the first half of the year, had saved about 3% of its overall costs through layoffs in the first half. With the implementation of greater cost control measures, the company will be able to achieve a more-optimal cost structure.
Take Note: The article said the game division, which is regarded as Tencent’s main income source, will also face layoffs in the second half of the year, while other businesses such as the platform and content business group may lay off 40% to 50% of their staff in some departments, and a few teams in other business groups will even lay off all their staff.
Digging Deeper: As China’s economic growth shows signs of slowing down, Tencent, one of the largest internet companies, has raised concerns as its revenue growth in the first quarter of this year was the lowest in its 18 years of listing, and its non-IFRS adjusted net profit even fell by 22.9% to 25.55 billion yuan ($3.8 billion). In the second quarter, China experienced a new wave of the Covid virus outbreak and implemented strict preventive measures in big cities like Shanghai, and the official attitude towards Internet companies has changed from “strong regulation” last year to “supporting the platform economy” due to fears of economic damage. However, Tencent’s president, Martin Lau said that it would take a while for the positive government signals to become concrete actions, so it’s understandable why internet companies are opting to lay off employees to save costs.
Market Reaction: Tencent shares, which had risen 1.7% in early trading Friday, gave back a bit before the noon close and are up 1.1% at HK$379.20. They now trade at the lower end of their 52-week range.
Translation by Jony Ho
To subscribe to Bamboo Works free weekly newsletter, click here