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

Google parent Alphabet Inc said it will cut about 12,000 jobs, more than 6 per cent of its global workforce, becoming the latest tech giant to retrench after years of abundant growth and hiring.

The cuts will affect jobs globally and across the entire company, Chief Executive Officer Sundar Pichai told employees in an email on Friday, writing that he takes “full responsibility for the decisions that led us here”.

Google Inc. headquarters.Credit: Bloomberg

Shares of Alphabet gained 4.3 per cent in New York on Friday morning (US time). The stock has fallen about 30 per cent over the past 12 months.

With the layoffs, Google joins a host of other tech giants that have drastically scaled back operations amid a faltering global economy and soaring inflation. Meta Platforms Inc, Twitter Inc and Amazon.com Inc have all slashed their ranks. Thanks to a resilient search business, Google has been one of the longest tech holdouts. But the company is dealing with a slowdown in digital advertising and its cloud-computing division continues to trail Amazon and Microsoft Corp.

“These are important moments to sharpen our focus, reengineer our cost base, and direct our talent and capital to our highest priorities,” Pichai wrote in the email.

He said the company has a “substantial opportunity in front of us” with artificial intelligence, a key investment area where Google is facing a surge in recent competition.

Jeff Dean, the executive who leads Google’s artificial intelligence and research efforts, said that apart from a “modest number” of reductions across the research unit, the company had determined it was over-invested in its data platform for care teams, called Google for Clinicians. The robotics unit will also see consolidation across Alphabet and Google, he said.

Dean cited ongoing challenges with the current economic climate as the reason for the staffing reductions. “As a company and an organization, we have to get laser focused on the priority areas we want to invest in,” Dean said. “We must continue to focus on long-term, ambitious research and development that will help us create revolutionary products for billions of people.”

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.

“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.

“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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