Billionaire calls on Google to ‘aggressively’ cut staff and pay

With a $6 billion stake in the company, he released a scathing letter on the performance of Google and called for “aggressive” cost cutting measures.

The billionaire owner of a hedge fund that is a major investor in Google and YouTube’s parent company Alphabet has made an extraordinary demand for the company to make “aggressive” cuts to staff numbers and reduce the pay of remaining employees.

Christopher Hohn, who owns London-based hedge fund TCI which holds a $6 billion stake in the company, wrote to Alphabet’s boss Sundar Pichai urging him to follow in the footsteps of its other tech rivals such as Facebook, Amazon and Microsoft and lay-off staff.

Thousands of workers at Meta, formerly Facebook, were let go with 13 per cent of its headcount lost adding up to 11,000 staff in the first round of redundancies in the company’s history recently.

Meanwhile, Amazon was set to fire 10,000 employees in coming weeks in corporate and technology roles, while Twitter’s new billionaire owner Elon Musk has also brutally slashed its workforce and at Microsoft at least 1000 people have been let go.

“We are writing to express our view that the cost base of Alphabet is too high and that management needs to take aggressive action,” wrote Mr Hohn, managing director at TCI, in a letter posted on its website on Tuesday.

“The company has too many employees and the cost per employee is too high.”

Christopher Hohn, managing director at TCI. Picture: Andreas Scholz/Bloomberg News

He highlighted that in the third quarter of this year Google’s search business had seen its total expenses grow 18 per cent year-on-year, while revenue had only jumped by 6 per cent.

Staff at Alphabet had hit 187,000 by the third quarter too and Mr Hohn declared its workforce was excessive.

“Alphabet’s headcount has increased at an annual rate of 20 per cent 2017. It has more than doubled since 2017,” the letter said.

“This growth is excessive, both in relation to historic headcount growth and what the business requires.”

Mr Hohn called for the business to be operated with “significantly fewer employees” adding he agreed with US investment firm Alitmeter Capital’s Brad Gerstner that it is “poorly kept secret in Silicon Valley” that companies like Google, Twitter and Meta could achieve similar levels of revenue with far fewer people.

He added that Mr Pichai had stated Google should be 20 per cent more efficient.

The Google campus on January 31, 2022 in Mountain View, California. Picture: Justin Sullivan/Getty Images/AFP

Google chief executive officer Sundar Pichai at Google I/O in May 2022.

The billionaire also hit out at Google paying some of the “highest salaries” in Silicon Valley, with the median salary sitting at a whopping $US295,884 ($A

“An analysis by S&P Global illustrates that median compensation at Alphabet was 67 per cent higher than at Microsoft and 153 per cent higher than the 20 largest listed technology companies in the US,” the letter said.

“There is no justification for this enormous disparity.”

The median salary at Microsoft is $US176,858 and $US117,055 at the top 20 US tech companies.

The four page letter stated that Alphabet employs talent computer scientists and engineers but many are in general sales, marketing and administration jobs, which should be “compensation in line with other technology companies”.

Waymo and Geely will collaborate to create ride-sharing driverless taxis. Picture: Supplied

There were also calls for Alphabet to scale back the losses incurred in its Other Bets business, which includes its self driving division Waymo, which has been the biggest source of losses.

Other Bets had made $US3 billion in revenue but $20 billion in operating losses over the last five years, with enthusiasm for self-driving cars has “collapsed and competitors have exited the market”, he said.

“Ford and Volkswagen recently decided to shut down their self-driving car venture. Waymo has not justified its excessive investment and its losses should be reduced dramatically,” it read.

He signed off the letter by flagging in a “new era of slower revenue growth, aggressive cost management is essential”.