A large Alphabet shareholder demands a reduction in staff

The American Big Tech they are not having a good time. signatures as Meta or Amazon they have made staff reduction in their ranks. alphabet-A so far had not taken any action in this regard, but a large shareholder requires the firm to take action on the matter according to Richard Waters and Tabby Kinder in Financial Times.

Alphabet faced a call from a big shareholder on Tuesday to cut its growing workforce and cut the high salaries paid to non-engineersin the latest sign of the pressure building on the biggest US tech companies.

TCI, a hedge fund that said it owns about $6 billion worth of Alphabet sharesasked for one “aggressive action”, which includes a dramatic cut in Google’s long-running investment in self-driving cars and a big increase in share buybacks.

The hedge fund’s call, in a letter to the CEO Sundar Pichaicame the day after reports that Amazon was preparing to cut some 10,000 jobs from its corporate organizationor about 3% of the total. Meta also revealed plans for a broader 13% cut last week.as it deals with falling ad revenue and high costs of building the metaverse.

TCI had previously approached Alphabet’s management about its concerns. “All of Silicon Valley has seen similar issues of overhiring and overcompensating people and they are taking action,” said the Hedge fund founder Chris Hohn in an interview with the Financial Times. “This is a broad topic at major technology companies that need to attack costs. But Alphabet is doing the opposite.”

The fast pace of hiring in Google’s Internet businesswhich accounts for more than 99% of Alphabet’s revenue, has long been a source of unhappiness on wall street, although concern has increased this year as growth and recruitment has accelerated. Alphabet incorporated more than 36,000 workers in the last 12 monthsincreasing its staff by almost a quarter, even when the Advertising revenue dropped dramatically.

Pointing to the high growth Alphabet reported in the lead up to and during the coronavirus pandemic, TCI said the cost discipline had not been a “priority” until last year. But she complained that the latest hiring spree had reduced the company’s operating profit margin from 39% last year to 32% in the last quarterand that The group’s median salary, at nearly $300,000, was two-thirds higher than Microsoft’s.

Pichai wrote to staff in July asking “greater urgency, greater focus and more hunger” as the economic outlook became more uncertain. He also said that Alphabet’s hiring would slow down for the rest of the year.

The Google founders Sergey Brin and Larry Page, control 51% of the votes in Alphabet through a special class of voting sharesdespite having less than 12% of the sharesinsulating them from direct pressure from shareholders.

Hohn indicated that he would not consider a proxy fight against the Alphabet board due to the founders’ control, but that he believed Brin and Page would take steps to cut costs. “I think those founders are rational and want the company to be healthy. I think they would rather be richer than poor.”

“The CEO says he wants to reduce hiring and be 20 percent more efficient, but he hasn’t really done that,” Hohn said. “This long-standing excessive and inflated cost growth must be corrected now. He’s out of control.”

In addition to cutting employee pay by reducing stock compensation and other bonuses it pays, Hohn asked Alphabet to drastically cut its spending on its so-called moonshot projects. Much of the 20 billion dollars lost in the last five years in what Alphabet calls his “other bets” were spent on the Waymo driverless car unitHohn noted, adding: “It’s been a flop. There’s no revenue model.”

TCI’s letter to Alphabet was first reported by the Wall Street Journal. Its shares have fallen a third this year.

The London-based activist fund has also held holdings in Twenty-First Century Foxand has ruled on his $71 billion deal with Disneyas well as the German car manufacturer Porsche, Canadian National Railway and Airbus Group.

alphabet-A it closed Tuesday’s session at $98.16 and the 70-period moving average is above the last candles. While the Ei indicators are mixed.