Major investor asks Google owner to ‘aggressively’ cut staff and pay

Billionaire hedge fund Sir Christopher Hohn has written to Alphabet saying staff at Google and YouTube’s parent company are overpaid and should be cut drastically.

London-based TCI, which has been a significant investor in the company since 2017 and has a stake valued at $6bn (£5.1bn), has written to its chief executive, Sundar Pichai, urging him to mimic cost-cutting measures introduced by big tech rivals, including the owner of Facebook, Meta, Amazon and Microsoft.

“We are writing to express our view that Alphabet’s cost base is too high and that management needs to take aggressive action,” TCI chief executive Hohn said in a letter released Tuesday. “The company has too many employees and the cost per employee is too high.”

Hohn said Alphabet, which employed nearly 187,000 people at the end of the third quarter, has doubled its workforce since 2017, with headcount growing 20% ​​annually over the period.

“This growth is excessive, both relative to historical headcount growth and business needs,” Hohn said. “Our conversations with former Alphabet executives suggest the company could operate more efficiently with significantly fewer employees.”

The four-page letter also points a finger at salaries, stating that Alphabet offers employees “some of the highest salaries in Silicon Valley.”

Last year, the median compensation for a typical Alphabet employee was $295,884 according to filings with the Securities and Exchange Commission (SEC), the letter said. That was 67% higher than Alphabet rival Microsoft and 153% higher than the 20 largest technology companies in the United States, according to an analysis by S&P Global.

“There’s no justification for this huge disparity,” said Hohn, who added that the computer scientists and engineers who can command the top salaries represent only a “fraction” of the employee base. “Many employees perform general sales, marketing and administrative tasks, which should be paid like other tech companies.”

The call for cost cutting comes as job cuts mount and multiply at Silicon Valley companies that are under pressure from a slowing global economy and revenue streams such as advertising . Last week, Mark Zuckerberg’s Meta, the parent company of Facebook, Instagram and WhatsApp, cut 11,000 employees in the first round of layoffs in the company’s history. On Monday, reports surfaced that Amazon was preparing to shed 10,000 employees in business and technology roles, its biggest layoffs ever.

Hohn’s letter also calls on Alphabet to at least halve the huge annual losses suffered by its “Other Bets” business, which TCI said made $3 billion in revenue but $20 billion in losses. operation over the past five years.

TCI has designated the Waymo self-driving car experience, the division’s biggest source of losses, as an area of ​​reduction. Unfortunately, enthusiasm for self-driving cars has waned and competitors have left the market,” Hohn said. “Ford and Volkswagen recently decided to shut down their self-driving car business. Waymo has not justified its excessive investment and its losses are expected to be significantly reduced.

TCI also called on Alphabet to increase its already substantial share buyback program to reduce its $116 billion in cash, given that large-scale mergers and acquisitions are limited due to regulatory scrutiny. He urged him to copy Apple’s approach and become “cash neutral” over time.

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