Tencent trims staff amid growing competition

Hong Kong — Tencent, which is 31% owned by Naspers, is putting about 10% of its managers on notice, as China’s largest gaming and social media company shakes up its workforce amid cooling growth and intensified competition, according to people familiar with the matter.

President Martin Lau told an internal meeting late in 2018 that its lowest-performing general managers would need to leave the company or be demoted, mainly because not much staff-pruning had occurred in the past, the people said, asking not to be identified talking about a private matter. Jane Yip, a spokesperson for the company, declined to comment.

The move comes as Tencent climbs out of one of its deepest troughs. Chinese regulators froze gaming approvals for nine months in 2018, walloping the company’s bread-and-butter business. The world’s eighth-most valuable company is also fending off competition from Alibaba Group and newcomers such as Bytedance, which is siphoning user attention with short video apps. Tencent asked marketing executives in its core gaming division to curtail spending to weather the approvals drought.

The social media giant is scheduled to report earnings on Thursday with analysts forecasting a 16% drop in net income in the December quarter. That would be the largest decline in at least a decade.

Tencent’s workforce had ballooned to more than 50,000 as of September, from just more than 30,000 at the end of 2015. It now follows a slew of Chinese tech companies from JD.com to ride-hailer Didi Chuxing that are shaking up their ranks to tide them over during tougher times. Funding has shrunk alongside a cooling in the nation’s economy, the world’s second largest. That has been exacerbated by trade tension with the US and regulatory clampdowns that fomented uncertainty and spooked would-be investors.

Chinese venture capital deals in the December quarter were down 25% and at their lowest since 2015, according to market research firm Preqin.

Tencent itself still commands a powerful asset in WeChat: a mash-up of WhatsApp, Instagram, Facebook, Yelp, Paypal and Twitter used by more than one-billion people to shop, pay for services and hail rides. That is a massive population of longer-term consumers not just for games and ads but also fledgling services from video to financial services. Yet WeChat founder Allen Zhang has said the platform needed rejuvenation and in January laid out his vision for how it should evolve.

Bloomberg