Job Cuts

David Goldsmith

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Salesforce to cut about 10% of staff

By Catherine Thorbecke, CNN

Updated 2:20 PM EST, Wed January 04, 2023
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(CNN) Salesforce said Wednesday that it will cut approximately 10% of its workforce and reduce its real estate footprint, making it the latest tech company to slash expenses as broader economic uncertainty continues to hit Silicon Valley particularly hard.

In a letter to employees announcing the job cuts, Marc Benioff, Salesforce's chair and co-CEO, admitted to growing headcount too much earlier in the pandemic and said most of the job cuts will take place over the coming weeks.

"I've been thinking a lot about how we came to this moment," Benioff wrote. "As our revenue accelerated through the pandemic, we hired too many people leading into this economic downturn we're now facing, and I take responsibility for that."

As of January 2022, Salesforce reported a headcount of 73,541 global employees. As of October 2022, the company reported a headcount of 79,824.
The tech sector, which was initially buoyed by a sudden and intense pandemic-fueled shift to online services, has since had to confront consumers returning to their offline lives. At the same time, the industry has been pummeled by a seemingly perfect storm of economic factors over the past year, including rising interest rates, looming recession fears and consumers and businesses rethinking expenses.

Also on Wednesday, video-sharing platform Vimeo said in a regulatory filing that it would cut approximately 11% of its workforce.

Like Benioff, a number of other tech founders and CEOs have since admitted they failed to accurately gauge pandemic demand. As a result, tech firms including Amazon and Meta have announced company-wide layoffs.

Dan Ives, an analyst at Wedbush Securities, wrote in investor note Wednesday that the cloud-computing giant "clearly is seeing headwinds in the field and thus is trying to quickly adjust to a softening demand environment." The analyst added that the company "clearly overbuilt out its organization over the past few years along with the rest of the tech sector."

Shares of Salesforce (CRM) were up more than 3% in early trading Wednesday following the announcement.

Like other tech companies, Salesforce's stock suffered steep declines last year. Against that backdrop, Salesforce made a significant change to its C-Suite: co-CEO and Vice Chair Bret Taylor said he would step down from his roles at the company at the end of January.
In his letter Wednesday, Benioff said impacted employees in the United States will "receive a minimum of nearly five months of pay, health insurance, career resources, and other benefits to help with their transition." Those outside the United States "will receive a similar level of support," Benioff wrote.

"The employees being affected aren't just colleagues," Benioff said. "They're friends. They're family. Please reach out to them. Offer the compassion and love they and their families deserve and need now more than ever. And most of all, please lean on your leadership, including me, as we work through this difficult time together."
 

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Amazon Layoffs to Hit Over 18,000 Workers, the Most in Recent Tech Wave​

Cuts focused on the company’s corporate staff exceed earlier projection and represent about 5% of the company’s corporate workforce​

image
The headquarters of Seattle-based Amazon, which was initially expected to pare roughly 10,000 employees from the company’s workforce.PHOTO: DAVID RYDER/GETTY IMAGES
By Dana Mattioli
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Amazon AMZN -0.79%decrease; red down pointing triangle.com Inc.’s layoffs will affect more than 18,000 employees, the highest reduction tally revealed in the past year at a major technology company as the industry pares back amid economic uncertainty.
The layoffs are concentrated in the company’s corporate ranks and represent roughly 5% of that element of its workforce, and 1.2% of its overall tally of 1.5 million employees as of September.

 

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Goldman to Cut About About 3,200 Jobs This Week After Cost Review​

  • Managers across firm are expected to start cuts mid week
  • Solomon has said firm is preparing to weather headwinds
By
Sridhar Natarajan
January 9, 2023, 12:04 AM UTC

Goldman Sachs Group Inc. is embarking on one of its biggest round of job cuts ever as it locks in on a plan to eliminate about 3,200 positions this week, with the bank’s leadership going deeper than rivals to shed jobs.
The firm is expected to start the process mid-week and the total number of people affected will not exceed 3,200, according to a person with knowledge of the matter. More than a third of those will likely be from within its core trading and banking units, indicating the broad nature of the cuts. The firm is also poised to unveil financials tied to a new unit that houses its credit card and installment-lending business, which will record more than $2 billion in pretax losses, the people said, asking not to be identified discussing private information.

A spokesperson for the New York-based company declined to comment. The cuts in its investment bank are elevated by the inclusion of the non front-office roles that were added to divisional headcount in recent years. The bank still has plans to continue hiring, including inducting the regular analyst class later this year.
Under Chief Executive Officer David Solomon, headcount has jumped 34% since the end of 2018, climbing to more than 49,000 as of Sept. 30, data show. The scale of firings this year is also affected by the firm’s decision to mostly set aside its annual cut of underperformers during the pandemic.

Slowdowns in various business lines, an expensive consumer-banking foray, and an uncertain outlook for markets and the economy are prompting the bank to batten down costs. Merger activity and fees from raising money for companies have taken a hit across Wall Street, and a slump in asset prices has eliminated another source of big gains for Goldman from just a year ago. Those broader industry trends have been compounded by the bank’s mistakes in its retail-banking foray where losses piled up at a much faster rate than forecast through the year.

That’s left the bank facing a 46% drop in profits, on about $48 billion of revenue, according to analyst estimates. Still, that revenue mark has been buoyed by its trading division that will post another jump this year, helping the firmwide figure notch its second-best performance on record.
The final job reductions figure is significantly lower than earlier proposals in management ranks that could have eliminated nearly 4,000 jobs.

The last major exercise of this scale came after the collapse of Lehman Brothers in 2008. Goldman had embarked on a plan to cut more than 3,000 jobs, or nearly 10% of its workforce at the time, and top executives elected to forgo their bonuses.

Sharing the Pain​

The latest cuts represent an acknowledgment that even businesses that outperformed this year will have to take the pain as well for a firm-wide performance that’s going to miss targets set for shareholders in a year of expense bleed.

That performance miss was particularly evident in the new unit called Platform Solutions, whose numbers stand out in the divisional breakdown. The more than $2 billion hit there is magnified by lending-loss provisions, exacerbated by new accounting rules that force the firm to set aside more money as loan volumes grow as well as ballooning expenses.
“There are a variety of factors impacting the business landscape, including tightening monetary conditions that are slowing down economic activity,” Solomon told staff at year-end. “For our leadership team, the focus is on preparing the firm to weather these headwinds.”
The cuts also come a week before the bank’s traditional year-end compensation discussions. Even for those who remain at the firm, compensation figures are expected to tumble, especially within investment banking.
It’s a stark contrast from last year, when staffers were getting showered with big bonus increases and a select few were even granted special payouts. At the time, Solomon’s $35 million compensation for 2021 put him alongside Morgan Stanley’s James Gorman as the highest paid CEO for a major U.S. bank.


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Microsoft to Lay Off 10,000 Workers as It Looks to Trim Costs​

The job cuts, which amount to less than 5 percent of the company’s work force, are its largest in roughly eight years.

Microsoft on Wednesday became the latest addition to a growing list of big technology companies that have announced plans to lay off employees because of overhiring during the pandemic and worries about the economy.

The company will lay off 10,000 workers, Satya Nadella, Microsoft’s chief executive, said, as it looks to trim costs amid economic uncertainty and to refocus on priorities such as artificial intelligence.
Microsoft employed about 221,000 workers as of the end of June, and the cuts amount to less than 5 percent of its global work force.
With the cuts, Microsoft joined a string of other tech giants that have pulled back after several years of frenetic hiring to meet the pandemic-fueled surge in online services and the expansion of cloud computing. The technology industry grew more rapidly than it had in decades, rivaling the expansion of the dot-com boom in the 1990s.

Microsoft and its peers responded to surging customer demand by essentially hoarding technical staff. But the market slowed last year as workers started to return to their offices, inflation squeezed budgets and consumers sought entertainment outside their homes.

More on Big Tech​

“The reality is you can adjust hiring very quickly, and that is what is going on,” said Brad Reback, an analyst at the investment bank Stifel. “I don’t think this is symptomatic of a bigger issue.”
The industry’s deceleration has been particularly hard on smaller tech firms, and companies that specialized in newer concepts like crypto have been significantly affected. But tech’s giants have not been spared. Among the industry’s big companies, Google’s parent company, Alphabet, and Apple are the only firms yet to announce significant layoffs.
Speaking at the World Economic Forum annual meeting in Davos, Switzerland, on Wednesday, Mr. Nadella said that after rapid acceleration during the pandemic, “quite frankly we in the tech industry will also have to get efficient.” He added that the industry “will have to show our own productivity gains” using its own technology.

Still, some of the tech industry’s biggest companies continue to measure their profits in the tens of billions of dollars. In the quarter ending in September, Microsoft had $50 billion in sales that produced $17.6 billion in profit. It has also continued to return money to investors through quarterly dividends and a $60 billion share buyback program authorized by its board of directors in 2021.
The company’s annual revenue grew 58 percent over three years, during which time it hired more than 75,000 people. But rising interest rates and the prospect of a recession have tempered Microsoft’s outlook. In the latest quarter, it reported its slowest growth in five years and warned that more tepid results could follow.
Microsoft’s stock price closed down nearly 2 percent on Wednesday and is down about 22 percent in the past year, which is better than many of its tech peers. The company is scheduled to report its next quarterly earnings on Tuesday.
Microsoft is going forward with several expensive bets, including potentially putting another $10 billion into its investment in OpenAI, which makes the explosively popular ChatGPT artificial intelligence system, and a $69 billion acquisition of the video game maker Activision that is facing challenges globally by antitrust regulators.

Mr. Nadella said in a message to staff that the layoffs “are the kinds of hard choices we have made throughout our 47-year history to remain a consequential company in this industry that is unforgiving to anyone who doesn’t adapt to platform shifts.”
The layoffs, which began on Wednesday and will continue through March, are the company’s largest in roughly eight years. Mr. Nadella cut about 25,000 jobs over the course of 2014 and 2015 as Microsoft abandoned its ill-fated acquisition of the mobile phone maker Nokia.
Despite the high-profile layoffs from some of the biggest names in tech — Microsoft, Amazon, Meta and others — the broader labor market remains generally strong. Cooling wage growth has provided some investors optimism that it will relieve pressure on the Federal Reserve to keep raising interest rates, but hiring has slowed only slightly.
The skills of engineers and other technical talent are still in high demand. Those who are laid off will likely find roles directly in industries like banking, retail or health care, which are undergoing the digitization of their operations, rather than at big tech firms themselves, labor analysts and recruiters say.

Customers are seeking “to do more with less,” Mr. Nadella wrote to employees. “We’re also seeing organizations in every industry and geography exercise caution as some parts of the world are in a recession and other parts are anticipating one,” he added.
The changes, including severance and other restructuring expenses, will cost $1.2 billion, Mr. Nadella said. In a regulatory filing, Microsoft said some of the costs would come from consolidating office leases, as well as “changes to our hardware portfolio.”
Microsoft makes the Surface line of laptops and tablets, and demand for personal computers has fallen sharply from the pandemic highs, when companies and families purchased laptops to work and study from home. In October, Amy Hood, the company’s finance chief, told investors that the slowdown in consumer PC sales that started in September would continue through at least June.
Mr. Nadella said the company would continue to hire in strategic areas, and called advances in artificial intelligence “the next major wave of computing.”

Other tech giants have also been reducing costs. Amazon began what is expected to be a huge round of layoffs on Wednesday, as part of its plans to cut its corporate work force by about 18,000 jobs.
“The exit out of Covid this past year was challenging,” Doug Herrington, who heads Amazon’s retail and operations business, wrote Wednesday morning in a message to staff obtained by The New York Times.
He added that although the company had trimmed expenses, “we’ve determined that we need to take further steps to improve our cost structure so we can keep investing in the customer experience that attracts customers to Amazon and grows our business.”
Mr. Herrington wrote that the company would continue to invest in areas including health care and grocery.
The business software company Salesforce said this month that it planned to lay off 10 percent of its work force, or about 8,000 employees, and Meta, the parent company of Facebook, announced at the end of last year that it was cutting more than 11,000 jobs.
 

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Alphabet cuts 12,000 jobs after pandemic hiring spree, refocuses on AI​

Google's parent Alphabet Inc is cutting about 12,000 jobs as it faces "a different economic reality", it said in a staff memo, doubling down on artificial intelligence (AI) and axing staff who support experimental projects.
The job cuts affect 6% of its workforce, and follows thousands of layoffs at tech giants including Amazon.com Inc, Microsoft Corp and Meta Platforms Inc who are downsizing after a pandemic-led hiring spree left them flabby in a weak economy.

Shares in Mountain View, California-based Alphabet, which boosted its workforce by nearly a third through 2020 and 2021, rose 4% on Friday. They had fallen 30% in the past 12 months, echoing a 24% slump in the broader tech industry.
Sundar Pichai, Alphabet's boss since 2019, said in the memo on Friday that he took "full responsibility" for the decisions that led to the layoffs.
Pichai, whose pay was recently tied more closely to performance, said this was a moment to "sharpen our focus, reengineer our cost base and direct our talent and capital to our highest priorities," as Alphabet looked to get imbue its products with more AI, echoing comments from Microsoft that announced job cuts on Wednesday.

Alphabet, long a leader in AI, is facing competition from Microsoft, which is reportedly looking to boost its stake in ChatGPT - a promising chatbot that answers queries with human-like responses.
Advertising dollars, Alphabet's mainstay revenue source, meanwhile, is feeling the squeeze from businesses chopping budgets as consumers pull back spending.
"It is clear that Alphabet is not immune from the tough economic backdrop, with worries about a U.S. recession growing," said Susannah Streeter, an analyst at Hargreaves Lansdown.
"Ad growth has come off the boil ... Competition is also heating up, with Alphabet facing a powerful rival in TikTok, and Instagram also vying for its important YouTube viewers," Streeter said, noting that Alphabet has also racked up billions in regulatory fines.

Evercore ISIS analyst Mark Mahaney said Alphabet's record-high headcount had created major margin risk going into fiscal 2023 and Bernstein analyst Mark Shmulik said the job cuts could save the company Alphabet $2.5 billion to $3 billion in costs.

With Alphabet's staff cuts, layoffs at four of the biggest U.S. tech companies total 51,000 jobs in the past few months. They have fanned fears of a recession even as the U.S. job market remains tight.
"The tech sector is bit like the proverbial canary in the coal mine," said Stuart Cole, an economist at Equiti Capital, who believes the tech layoffs portend that the outlook for job security is finally beginning to turn more negative.
Apple, which hired more prudently through the pandemic, has held off on cuts so far. On Friday, though, website AppleInsider reported citing sources that the iPhone maker had started to lay off non-seasonal employees in its retail channel in places such as Best Buy stores.
Apple was not immediately available for a comment on the report.

Alphabet has been working on a major AI launch, two people familiar with the matter told Reuters. One of the sources said it would take place in the spring. The New York Times also reported that Google planned to unveil more than 20 new products and a search engine including chatbot features.
Among those losing their jobs are recruiters, corporate staff and people working on engineering and product teams, Pichai said. Google has cut most jobs at Area 120, its in-house incubator for new projects, a company spokesperson told Reuters.
The Alphabet Workers Union said in a statement that the company's leadership taking "full responsibility" was "little comfort."
"It's appalling that our jobs are first on the chopping block so shareholders can see a few more points in a chart next quarter," the union said.
In the United States, where Alphabet has already emailed affected employees, staff would receive severance and six months of healthcare as well as immigration support.
Overseas, layoff notifications will take longer due to local employment laws and practices, Pichai said in the memo. Employees in Asia will learn starting in February if the reduction impacts them.
 

David Goldsmith

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For Tech Companies, Years of Easy Money Yield to Hard Times
Rock-bottom rates were the secret engine fueling $1 billion start-ups and virtual attempts to conquer the physical world. But in 2023, reality bites.


By David Streitfeld
David Streitfeld has written about technology and its effects for more than 20 years.

Jan. 23, 2023
Eighteen months ago, the online used car retailer Carvana had such great prospects that it was worth $80 billion. Now it is valued at less than $1.5 billion, a 98 percent plunge, and is struggling to survive.

Many other tech companies are also seeing their fortunes reverse and their dreams dim. They are shedding employees, cutting back, watching their financial valuations shrivel — even as the larger economy chugs along with a low unemployment rate and a 3.2 percent annualized growth rate in the third quarter.

One largely unacknowledged explanation: An unprecedented era of rock-bottom interest rates has abruptly ended. Money is no longer virtually free.

For over a decade, investors desperate for returns sent their money to Silicon Valley, which pumped it into a wide range of start-ups that might not have received a nod in less heady times. Extreme valuations made it easy to issue stock or take on loans to expand aggressively or to offer sweet deals to potential customers that quickly boosted market share.

It was a boom that seemed as if it would never end. Tech piled up victories, and its competitors wilted. Carvana built dozens of flashy car “vending machines” across the country, marketed itself relentlessly and offered very attractive prices for trade-ins.

“The whole tech industry of the last 15 years was built by cheap money,” said Sam Abuelsamid, principal analyst with Guidehouse Insights. “Now they’re getting hit by a new reality, and they will pay the price.”

Cheap money funded many of the acquisitions that substitute for organic growth in tech. Two years ago, as the pandemic raged and many office workers were confined to their homes, Salesforce bought the office communications tool Slack for $28 billion, a sum that some analysts thought was too high. Salesforce borrowed $10 billion to do the deal. This month, it said it was cutting 8,000 people, about 10 percent of its staff, many of them at Slack.

Even the biggest tech companies are affected. Amazon was willing to lose money for years to acquire new customers. It is taking a different approach these days, laying off 18,000 office workers and shuttering operations that are not financially viable.

Carvana, like many start-ups, pulled a page out of Amazon’s old playbook, trying to get big fast. Used cars, it believed, were a highly fragmented market ripe for reinvention, just the way taxis, bookstores and hotels had been. It strove to outdistance any competition.

The company, based in Tempe, Ariz., wanted to replace traditional dealers with, Carvana said grandly, “technology and exceptional customer service.” In what seemed to symbolize the death of the old way of doing things, it paid $22 million for a six-acre site in San Diego that a Mazda dealer had occupied since 1965.

Layoffs in Big Tech
After a pandemic hiring spree, several tech companies are now pulling back.
A Growing List: Alphabet, Microsoft and Spotify are among the latest tech giants to cut jobs amid concerns about an economic slowdown.
A Small Reversal: Some of the biggest tech companies grew enormously during the pandemic, adding tens of thousands of workers. The recent layoffs have reversed a fraction of that hiring.
Tech’s Generational Divide: The industry’s recent job cuts have been eye-opening to young workers. But to older employees who experienced the dot-com bust, it has hardly been a shock.
No More Free Money: Many tech companies are seeing their dreams dim. One largely unacknowledged explanation: An era of rock-bottom interest rates has abruptly ended.
Where traditional dealerships were literally flat, Carvana built multistory car vending machines that became memorable local landmarks. Customers picked up their cars at these towers, which now total 33. A corporate video of the building of one vending machine has over four million views on YouTube.

In the third quarter of 2021, Carvana delivered 110,000 cars to customers, up 74 percent from 2020. The goal: two million cars a year, which would make it by far the largest used car retailer.

Then, even more quickly than the company grew, it fell apart. When used car sales rose more than 25 percent in the first year of the pandemic, that created a supply problem: Carvana needed many more vehicles. It acquired a car auction company for $2.2 billion and took on even more debt at a premium interest rate. And it paid customers handsomely for cars.

But as the pandemic waned and interest rates began to rise, sales slowed. Carvana, which declined to comment for this article, did a round of layoffs in May and another in November. Its chief executive, Ernie Garcia, blamed the higher cost of financing, saying, “We failed to accurately predict how all this will play out.”

Some competitors are even worse off. Vroom, a Houston company, has seen its stock fall to $1 from $65 in mid-2020. Over the past year, it has dismissed half of its employees.

“High rates are painful for almost everyone, but they are particularly painful for Silicon Valley,” said Kairong Xiao, an associate professor of finance at Columbia Business School. “I expect more layoffs and investment cuts unless the Fed reverses its tightening.”

At the moment, there is little likelihood of that. The market expects two more rate increases by the Federal Reserve this year, to at least 5 percent.

In real estate, that is trouble for anyone expecting a quick recovery. Low rates not only pushed up house prices but also made it irresistible for companies such as Zillow as well as Redfin, Opendoor Technologies and others, to get into a business that used to be considered slightly disreputable: flipping houses.

In 2019, Zillow estimated it would soon have revenue of $20 billion from selling 5,000 houses a month. That thrilled investors, who pushed the publicly traded Seattle company to a $45 billion valuation and created a hiring boom that raised the number of employees to 8,000.

Zillow’s notion was to use artificial intelligence software to make a chaotic real estate market more efficient, predictable and profitable. This was the sort of innovation that the venture capitalist Marc Andreessen talked about in 2011 when he said digital insurgents would take over entire industries. “Software is eating the world,” he wrote.

In June 2021, Zillow owned 50 homes in California’s capital, Sacramento. Five months later, it had 400. One was an unremarkable four-bedroom, three-bath house in the northwest corner of the city. Built in 2001, it is convenient to several parks and the airport. Zillow paid $700,000 for it.

Zillow put the house on the market for months, but no one wanted it, even at $625,000. Last fall, after it had unceremoniously exited the flipping market, Zillow unloaded the house for $355,000. Low rates had made it seem possible that Zillow could shoot for the moon, but even they could not make it a success.

Ryan Lundquist, a Sacramento appraiser who followed the house’s history closely on his blog, said Zillow realized real estate was fragmented but perhaps did not quite appreciate that houses were labor-intensive, deeply personal, one-to-one transactions.

“This idea of being able to come in and change the game completely — that’s really difficult to do, and most of the time you don’t,” he said.

Zillow’s market value has now shrunk to $10 billion, and its employee count to around 5,500 after two rounds of layoffs. It declined to comment.

The dream of market domination through software dies hard, however. Zillow recently made a deal with Opendoor, an online real estate company in San Francisco that buys and sells residential properties and has also been ravaged by the downturn. Under the agreement, sellers on Zillow’s platform can request to have Opendoor make offers on their homes. Zillow said sellers would “save themselves the stress and uncertainty of a traditional sale process.”

That partnership might explain why the buyer of that four-bedroom Sacramento house, one of the last in Zillow’s portfolio, was none other than Opendoor. It made some modest improvements and put the house on the market for $632,000, nearly twice what it had paid. A deal is pending.

“If it were really this easy, everyone would be a flipper,” Mr. Lundquist said.

The easy money era had been well established when Amazon decided it had mastered e-commerce enough to take on the physical world. Its plans to expand into bookstores was a rumor for years and finally happened in 2015. The media went wild. According to one well-circulated story, the retailer planned to open as many as 400 bookstores.

The company’s idea was that the stores would function as extensions of its online operation. Reader reviews would guide the potential buyer. Titles were displayed face out, so there were only 6,000 of them. The stores were showrooms for Amazon’s electronics.

Being a showroom for the internet is expensive. Amazon had to hire booksellers and lease storefronts in popular areas. And letting enthusiastic reviews be one of the selection criteria meant stocking self-published titles, some of which were pumped up with reviews by the authors’ friends. These were not books that readers wanted.

Amazon likes to try new things, and that costs money. It took on another $10 billion of long-term debt in the first nine months of the year at a higher rate of interest than it was paying two years ago. This month, it said it was borrowing $8 billion more. Its stock market valuation has shrunk by about a trillion dollars.

The retailer closed 68 stores last March, including not only bookstores but also pop-ups and so-called four-star stores. It continues to operate its Whole Foods grocery subsidiary, which has 500 U.S. locations, and other food stores. Amazon said in a statement that it was “committed to building great, long-term physical retail experiences and technologies.”

Traditional book selling, where expectations are modest, may have an easier path now. Barnes & Noble, the bricks-and-mortar chain recently deemed all but dead, has moved into two former Amazon locations in Massachusetts, putting about 20,000 titles into each. The chain said the stores were doing “very well.” It is scouting other former Amazon locations.

“Amazon did a very different bookstore than we’re doing,” said Janine Flanigan, Barnes & Noble’s director of store planning and design. “Our focus is books.”
 
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