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Friday, Dec 02, 2022

Google's Parent Company Has Too Many Employees, Needs To Cut Costs: Investor

Google's Parent Company Has Too Many Employees, Needs To Cut Costs: Investor

The fund, an investor in Alphabet since 2017 with a $6 billion stake, said the company had "too many employees and cost per employee is too high".
Activist investor TCI Fund Management has called on Alphabet Inc to cut costs by lowering its headcount and reduce losses in its self-driving unit Waymo, saying the Google parent needs to adjust to an era of slower growth.

The fund, an investor in Alphabet since 2017 with a $6 billion stake, said the company had "too many employees and cost per employee is too high".

TCI said Alphabet pays some of the highest salaries in Silicon Valley, noting that the company has increased headcount by 20% annually since 2017 and more than doubled it since then.

Alphabet did not immediately respond to a Reuters request for comment.

Shares of Alphabet, which has a market capitalization of $1.24 trillion, were up nearly 5% in mid-day trading.

Many tech companies including Meta Platforms Inc are lately making deep cuts to their employee base as part of its restructuring efforts to navigate a potential downturn in the economy, after years of rapid hiring.

Alphabet, which is also struggling with advertisers cutting back on spending, said in late October that it plans to cut hiring by more than half.

"Cost discipline is now required as revenue growth is slowing. Cost growth above revenue growth is a sign of poor financial discipline," the fund said in the letter to Alphabet's management and board.

TCI also called on Alphabet to disclose operating profit margin targets and reduce losses in Other Bets, the unit that includes Waymo and other special projects.

Investments into Waymo were not justified and losses should be reduced "dramatically," TCI said, adding that the autonomous vehicle technology unit has generated $3 billion but recorded operating losses of $20 billion so far. TCI demanded the unit reduce operating losses by at least 50%.
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