RingCentral ‘Tidying Up the Books’ with New Layoffs; 8x8 Acquisition Looming?

RingCentral has conducted another round of layoffs, which one source told Channel Futures was part of an effort to “tidy up the books” in anticipation of acquiring 8×8.

Late last year, another unnamed source told Investing.com that RingCentral was working with an investment bank to evaluate a potential deal with 8×8. The proposed transaction would give RingCentral access to its own contact-center-as-a-service (CCaaS) offering.

Regarding the recent layoffs, RingCentral did not return our request for comment seeking confirmation of the number of impacted workers and reasons for the cuts. Individuals across many departments were affected, and our source reported that about 30 jobs were eliminated.

Employees have said this is the fourth round of layoffs in recent months. In November, RingCentral reduced 10% of its staff.

According to social media, Luke Nagy was one of those affected by last week’s staff reduction. The former strategic partner manager at RingCentral worked for the company for more than three years.

Nagy took to LinkedIn to explain that his wife was laid off just two weeks earlier from another firm.

“Then, the other shoe dropped. On Thursday morning, I was informed that my position [at RingCentral] was being eliminated due to the same type of [reduction in force]. Cue existential dread,” he wrote.

Nagy added: “I do not begrudge either of our companies for the decisions they had to make. We’re not naïve to the macroeconomic factors that are forcing many, many companies to make similar cuts.”

A Puzzling Decision?

Robert Schneider was also laid off. The former customer success and management executive at RingCentral said he was “a casualty of the fourth round of layoffs” and that it “felt like one of the more difficult situations I’ve had to process in my career.”

Schneider wrote that “this decision, although puzzling, will definitely end up benefiting me in ways I don’t quite see yet.”

Layoffs in the tech sector might seem puzzling when the U.S. GDP still shows a strong demand for technology. And demand for both hardware and software has remained steady in recent years. Also, Gartner predicts cloud spending will increase by 20% for the next two to three years, CNBC reported.

COMMfusion’s Blair Pleasant

However, many tech companies overhired during the pandemic and have to right-size, said Blair Pleasant, president and principal analyst of COMMfusion. UCaaS companies are facing the same macroeconomic conditions other tech companies are encountering. Pleasant said tech layoffs are becoming more common in this segment.

“It’s all about profitability — RingCentral still isn’t profitable. Wall Street and investors are punishing those companies that aren’t,” she said. “By laying off some staff, [RingCentral] can reduce costs and get closer to profitability.”

‘High-Risk’ Stock

Matt Clark, a research analyst at Money & Markets wrote late last year that RingCentral’s stock was “high-risk” and to expect it to underperform the broader market.

“This stock is overvalued and, despite increasing sales in every quarter since 2018, isn’t generating any profit,” Clark said.

Our source noted that RingCentral is now scrutinizing spending across the board to reach greater profitability. However, the source added that they did not foresee any more layoffs by the company in the near term. This is because most departments are as streamlined as possible, they said.