Google’s parent company, Alphabet Inc, is said to be taking aggressive cost-cutting measures after receiving a letter from activist hedge fund TCI Fund Management. The company was asked to take quick decisions to reduce its financial output.
“This growth is high, relative to historical headcount growth and what the business needs,” Hohn said in the letter. “Our conversations with former Alphabet executives indicate that the business can be run more efficiently with significantly fewer employees.”
Alphabet Inc’s headcount grew by 20 percent annually, nearly doubling growth since 2017 to 187,000 employees. And it has the highest wages in Silicon Valley. The letter also said Alphabet Inc’s 14A filing showed the median compensation of staff in 2021 was $295,884, 67 percent more than Microsoft and “153 percent more than the 20 largest listed technology companies in the US.”
While the median salary for the top 20 technology companies is around $117,000, Microsoft’s annual salary is $177,858. The letter argued against these numbers, saying, “There is no justification for this enormous disparity.”
“We acknowledge that Alphabet employs some of the most talented and bright computer scientists. But these represent only a fraction of the employee base,” the letter said. However, the letter states that Alphabet’s non-engineering staff, compensation should be “in line with other technology companies”.
Alphabet is also said to be shedding expensive long-term bets such as the self-driving car project Waymo. Alphabet’s outside bets have earned just $3 billion cumulatively, but have lost $20 billion over the past five years. According to CNBC’s David Faber, TCI is outside Alphabet’s top 20 largest shareholders.
Alphabet Inc did not immediately respond to Gizmodo’s request for comment. Google is one of the only outliers not to cut employees. The letter points to other tech companies like Meta and Twitter as examples of businesses that have recently cut headcount.
Brad Gerstner of Altimeter Capital writes, “It’s a well-kept secret in Silicon Valley that companies from Google to Meta to Twitter to Uber can achieve similar levels of revenue with very few people.” Facebook’s parent company Meta has cut about 11,000 jobs, Twitter has cut 3,700 jobs, and the New York Times reports that Amazon plans to cut 10,000 jobs.
Some have called it the end of Silicon Valley’s golden age. “This party will never go on,” Margaret O’Mara, a professor at the University of Washington and author of The Code: Silicon Valley and the Remaking of America, told The Guardian. “In many ways, we’re getting back to normal after a massive run-up during which everything was supersized.”
More than 121,000 layoffs occurred at 789 tech companies in 2022, according to layoffs.FYI, this a site that tracks job cuts in the tech industry. From 3,625 layoffs in February this year to 25,563 in the first half of November.
However, O’Mara told the outlet that despite the sudden increase in layoffs and cost-cutting efforts, he doesn’t believe this is the end for the Silicon Valley tech industry. “The obituary of the industry is sometimes written prematurely,” she said. “It may be the end of an era for Silicon Valley, but it’s unlikely to be the end of Silicon Valley,” she added.