RingCentral will cut its workforce by ten percent as it attempts to counter economic uncertainty.
The announcement came in tandem with its third-quarter earnings results, where it surpassed expectations but posted weaker-than-forecasted financial guidance for Q4.
Despite this, RingCentral’s stocks did rise 10 percent after confirming the layoffs, mirroring the market reaction to Meta’s job cuts earlier in the week.
Commenting on the measures during an earnings call, Vlad Shmunis, Founder, Chairman, and CEO at RingCentral, stated:
While we recently made the extremely difficult decision to further rationalize our workforce, we believe this will allow us to be more agile and better align our course with our strategic priorities in the current macro environment.
“This decision was not made lightly, and we understand the impact this has on our people and their families. We’re taking meaningful action to help ease the transition for our impacted employees.
“We want to underscore how grateful we are for their hard work and all their contributions. RingCentral would not be where we are today without them.”
A Change In Its Fortunes
The story of RingCentral is a remarkable one. From “two guys in the garage,” it’s now a $2 billion recurring revenue business.
Yet, like many other CX vendors, it has struggled to combat an increasingly tricky macro environment.
This struggle came further to the fore two months ago when MarketWatch cited research firm New Constructs while reporting that its stock prices were going to zero.
Moreover, it suggested that the company would be out of cash before the end of September, referring to the vendor as a “cash incinerator”.
Yet, these reports seemed to miss the mark, and Zeus Kerravala, Founder and Principal Analyst at ZK Research, poked holes in the research.
In September, Kerravala wrote on LinkedIn: “According to Ring’s last filing, the company has cash and cash equivalents of $307 million and generated positive free cash flow (FCF) during the trailing twelve months of $120 million.
“This is contrary to the New Construct report pointing to Ring having a FCF burn of $990 million during this period.”
Nevertheless, RingCentral does find itself in a tricky spot and is taking steps to expand its operating margins and increase efficiencies within the business.
Unfortunately, these will include many job losses. Yet, Shmunis appears confident that these actions will help turn the tide. He said:
I believe we’re well-positioned to emerge even stronger as the economic recovery begins.
Layoffs Across the CX Industry
The trend of CX vendors laying off staff to streamline operations stretches far beyond RingCentral, with Microsoft, Oracle, and Twilio recently making similar announcements.
Meanwhile, Zendesk added its name to this growing roster earlier this week, announcing that it’ll lay off five percent of its staff after a rollercoaster year.
There are many causes of this troubling trend. Most prominent is customers extending deal cycles, bringing in additional decision-makers, and taking a more measured approach to business.
Also, for U.S. multinationals – including RingCentral – the dollar’s strength is making it much more expensive to sell abroad, limiting profit margins.
Yet, there is hope for many CX vendors that offer cloud and automation technologies. After all, many businesses will crave the additional flexibility to adapt to changing demand, which the cloud offers.
Moreover, the opportunity to minimize operational costs by leveraging more automation will excite many businesses.
RingCentral offers these technologies, and Mo Katibeh, President and COO at RingCentral, remains optimistic. He said:
Our leading product continues to differentiate us from others, and our focus on execution and driving profitable growth sets us up well for the future.
Unfortunately, the path to this profitable growth does mean addressing bloated services and layoffs.
Yet, RingCentral has released many intriguing innovations in the past 12 months, including a virtual agent hub and further features for Microsoft Teams. It has also partnered with many businesses and strengthened its relationships with Avaya, Mitel, and Alcatel-Lucent.
By building on this innovation and partner base, RingCentral will hope to turn the tide.