Where Google Could Make Cuts to Satisfy Investors Amid Mass Layoffs

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  • Google’s parent company Alphabet has announced plans to lay off around 12,000 workers.
  • The company’s stock is down 31% in the past year, and CEO Sundar Pichai was under pressure.
  • Pichai has set a goal of making the company 20% more efficient across all divisions. 

After biding its time, Google’s parent company Alphabet has finally made a decision: it will conduct mass layoffs like most of its Silicon Valley peers battling an economy in turmoil. 

On Friday, Alphabet CEO Sundar Pichai announced in an email to workers the “difficult decision” to reduce its headcount by around 12,000 people, with those affected in the US already receiving emails about the move. 

Pichai wrote in the email, which was later posted on the company’s blog, that the decision would mean “saying goodbye to some incredibly talented people we worked hard to hire and have loved working with.”

He added: “I’m deeply sorry for that. The fact that these changes will impact the lives of Googlers weighs heavily on me, and I take full responsibility for the decisions that led us here.” 

The move has been widely anticipated by industry watchers, with tech giants from Amazon and Microsoft to Salesforce all making the decision to cut thousands of roles from their workforce in recent months. 

“HEY GOOGLE! YOUR ISLAND IS GETTING LONELIER!” Bernstein analysts wrote on Wednesday after Insider broke the news of more job cuts coming to Microsoft.

The decision won’t come as too much of a surprise, as Pichai hadn’t ruled out layoffs but had acknowledged the company will need to react to headwinds, previously announcing plans to make the business 20% more efficient.

The decision may also seem inevitable given the challenges it has faced with profitability. Its profit margins declined 740 basis points year-over-year last quarter in the absence of job cuts, according to Bernstein estimates. Compare this to Microsoft, which plans to lay off 10,000 workers. Its profit margins had declined just 180 basis points year-over-year, according to Bernstein estimates.

Wall Street had been skeptical that the company can avoid mass layoffs, and now they’re finally here. It’s possible that Google will weather the storm with smart targeted cutbacks and consolidation.

“It’s going to be increasingly difficult to weave an investor story for which they’re willing to be patient without an announcement of some very real and immediate cost-cutting exercises,” Mark Shmulik, senior analyst at Bernstein, told Insider.

In his blog post, Pichai said that “a rigorous review across product areas and functions” had been undertaken, with the roles being eliminated cutting “across Alphabet, product areas, functions, levels and regions.” He did not specify which specific areas would be affected. 

Here’s where Alphabet may trim costs across its business amid fears about the economy:

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