Report: Amazon Cost-Cutting Could Impact Alexa

Posted on November 11, 2022 by Paul Thurrott in Amazon, Smart Home with 2 Comments

Like other Big Tech companies, Amazon is looking for ways to save money during the economic downturn, and one of the more obvious solutions is to take a hard look at money-losing businesses. Amazingly, one of those businesses is its Alexa devices unit, which has over 10,000 employees and routinely posts an operating loss of $5 billion per year.

That’s according to a new report in The Wall Street Journal, which has spoken to multiple sources and reviewed internal Amazon documents. The issue isn’t so much Alexa’s popularity—the platform dominates the smart home market—it’s that most people use Alexa for only a few simple functions: customer interactions with Alexa grew 30 percent in the past year, Amazon says, with top use cases including playing music, controlling smart home devices, and online shopping. But developing new features is very expensive, and doing so would benefit only a small sliver of customers.

Privately, Amazon has told employees in this and other unprofitable business units to start looking for jobs elsewhere in the company. But publicly, Amazon maintains a more positive outlook.

“Our senior leadership team regularly reviews our investment outlook and financial performance, including as part of our annual operating plan review,” an Amazon statement explains. “As part of this year’s review, we’re of course taking into account the current macro-environment and considering opportunities to optimize costs. But Amazon is as optimistic about Alexa’s future today as we’ve ever been, and it remains an important business and area of investment for Amazon.”

Amazon made history this week for the wrong reasons when it became the first-ever company to lose $1 trillion in market capitalization since last year. But it’s not alone: Microsoft lost nearly $900 billion in market cap during this same time period. Meta just announced it is laying off over 11,000 employees, or about 13 percent of its staff. Google has killed key products like Stadia and future Pixelbook laptops. Even Apple has been forced to raise prices. And all of these companies have effectively halted hiring as well.

The problems are exacerbated by the historic growth that Big Tech experienced during the COVID-19 pandemic. Amazon, for example, hired over 800,000 employees during the pandemic, mostly at its warehouses, to meet exploding demand. But with that demand falling rapidly this year, the firm has started closing warehouses and is no longer hiring.

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