Dropbox is laying off 500 people and pivoting to AI

Dropbox is laying off around 500 employees, making up about 16 percent of the company’s entire workforce. In a memo to employees, Dropbox CEO Drew Houston attributes the layoffs to a rocky economy — but also says that the cuts will allow the company to build out its AI division.

“In an ideal world, we’d simply shift people from one team to another. And we’ve done that wherever possible,” Houston writes. “However, our next stage of growth requires a different mix of skill sets, particularly in AI and early-stage product development. We’ve been bringing in great talent in these areas over the last couple years and we’ll need even more.”

As part of the change, Houston says Dropbox will consolidate its core and document workflow businesses and that it’s also making adjustments to its product development teams. Houston adds that Dropbox is still “profitable” despite rough economic times and that the job cuts are part of the “natural maturation” of the Dropbox business.

“The changes we’re announcing today, while painful, are necessary for our future,” Houston notes. “I’m determined to ensure that Dropbox is at the forefront of the AI era, just as we were at the forefront of the shift to mobile and the cloud. We’ll need all hands on deck as machine intelligence gives us the tools to reimagine our existing businesses and invent new ones.”

In the past, Houston has expressed interest in exploring AI, with a 2018 letter from him and co-founder Arash Ferdowsi stating that “machine intelligence” will eventually allow Dropbox to better understand and serve its customers. The file hosting service has introduced some AI-powered features over the years, such as the automatic text recognition feature it added in 2018. However, laying off employees just to replace them with ones with experience in AI signals that Dropbox is serious about making a shift into the industry.

Affected employees will be able to receive a minimum of 16 weeks of pay, up to six months of healthcare, and the ability to keep company devices for personal use. They’ll also receive career coaching and job placement support.

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