SoundHound Lays Off Half of Company: Report
Voice AI developer SoundHound has laid off half of its staff, according to a report from Gizmodo. The approximately 200 people were let go from across the company just as SoundHound announced it would make a profit this year, and only a couple of months after a 10% downsizing by the company. We’ve reached out to SoundHound for comment and will update this post with any additional information. SoundHound CEO Keyvan Mohajer told employees in a letter about the layoffs that the market’s change since it decided to go public led to a need for faster profit, hence the layoffs and other strategy shifts.
SoundHound now has about 200 employees, down from the 450-person team it had ahead of the first layoff round, which also included pay cuts for many still employed at the company. Former employees told Gizmodo the severance package for two weeks of pay includes no health insurance and is itself contingent on SoundHound securing more money. Notably, the news of the layoffs broke Friday evening the week after the company’s profit plan announcement and a few days after it expanded its SoundHound for Restaurants program in a partnership with Toast.
The change in fortune for SoundHound can be tracked through its stock price, which fell from $8.72 to about $1 since its April IPO, which brought its market cap from about $2 billion to $200 million. That announcement mentioned cost reductions along with increased revenue, but not a 50% cut in employees specifically. The company said its renewed focus on restaurants and licensing deals with automotive and smart device makers will lead to more than 50% revenue growth while the cuts reduce costs by 40%. That reduction makes more sense with the massive layoffs in mind. As Voicebot founder Bret Kinsella pointed out, the goal for SoundHound may be to garner interest from companies looking to acquire a voice tech developer.
“SoundHound is quickly becoming an attractive acquisition target. They have a book of business with prominent customers, a product that has broad application and supports 22 languages, a highly discounted market capitalization from its public offering, and they are now on a path to profitability. Many companies are interested in having their own voice assistant, and SoundHound is suddenly a bargain,” Kinsella said. “A large telecom provider or device maker would be ideal acquirers. Also, don’t count out IBM. SoundHound’s customer base aligns relatively well with IBM, and its solutions are easier to adopt than the Watson offerings. Another type of acquirer may also emerge. All of the big tech companies have their own voice assistant, so acquiring SoundHound may seem redundant. However, at the current valuation, there may be interest solely based on SoundHound’s portfolio of more than 200 patents. Some companies may want the patents while others may want to ensure SoundHound’s patents don’t wind up in the hands of a competitor.”