Google parent Alphabet to slash 12,000 jobs, sharpen focus on AI

The industry-wide job cuts seem dramatic but they pale in comparison to the frenzied hiring that took place for most of the COVID-19 pandemic. In many cases, the layoffs will rewind the clock only about a year. Companies like Meta doubled in size during the pandemic, and Salesforce had added more than 30,000 people. Tech companies were competing with each other for talent.

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“There was a mad grab for engineers,” over the last few years “and the fear they couldn’t get them,” said Ivan Feinseth, chief investment officer at Tigress Financial Partners LLC.

Pichai said Alphabet would be paying affected employees at least 16 weeks of severance and six months worth of health benefits in the US, with other regions receiving packages based on local laws and practices. Bonuses won’t be affected, he said.

In October, the company reported third-quarter earnings and revenue that missed analyst expectations. Profit declined 27 per cent to $US13.9 billion compared to the prior year. At the time, Pichai said Google would curb its expenses and Chief Financial Officer Ruth Porat said the number of new jobs would fall by more than half in the fourth quarter from the previous period.

Google’s reduction in headcount follows investor pressure to adopt a more aggressive strategy to curb spending. In November, TCI Fund Management Ltd. urged the internet search giant in an open letter to publicly set a target for profit margins, increase share buybacks and reduce losses in its portfolio of Other Bets, Alphabet’s moonshot division.

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“The company has too many employees and the cost per employee is too high,” TCI Managing Director Chris Hohn said, noting that Alphabet’s headcount had swelled 20 per cent per year since 2017.

Google has made a series of cost-cutting moves in recent months, cancelling the next generation of its Pixelbook laptop and permanently shuttering Stadia, its cloud gaming service. Earlier in January, Verily, a biotech unit of Alphabet, said it was cutting 15 per cent of its staff.

Since 2017, the company has more than doubled its workforce, which reached 186,779 in the most recent quarter. Many of those hires were for Google’s cloud division, where the company is trying to build a second sales line to supplement its ads business.

But the cloud unit, which brought in $US6.9 billion last quarter, is still third in the market by most estimates.

In recent years, Google also added thousands of employees for its nascent hardware division with the acquisitions of HTC and Fitbit.

According to the human-resources consulting firm Challenger, Gray & Christmas Inc., the most job cuts in 2022 were in the tech sector — 97,171 for the year, up 649 per cent compared to the previous year.

Bloomberg

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