Jan 20 (Reuters) – Google’s parent company Alphabet Inc (GOOGL.O) is cutting around 12,000 jobs as it faces “a different economic reality”, it said in a memo, doubling down artificial intelligence (AI) and removing staff who support experimental projects.
The job cuts affect 6% of its workforce and follow thousands of layoffs at tech giants including Amazon.com Inc (AMZN.O), Microsoft Corp (MSFT.O) and Meta Platforms Inc (META .O) who are downsizing after a pandemic-driven hiring spree has left them limp in a weak economy.
Shares of Mountain View, Calif.-based Alphabet, which has increased its workforce by nearly a third through 2020 and 2021, rose 4% on Friday. They had fallen 30% in the past 12 months, echoing a 24% drop in the broader tech industry (.IXIC).
Sundar Pichai, Alphabet’s boss since 2019, said in the memo on Friday that he took “full responsibility” for the decisions that led to the layoffs.
Pichai, whose salary has recently been more closely tied to performance, said now is the time to “strengthen our focus, reorganize our cost base and direct our talent and capital to our highest priorities.” , as Alphabet sought to infuse its products with more AI. , echoing comments from Microsoft which announced job cuts on Wednesday.
Alphabet, a long-time leader in AI, is facing competition from Microsoft, which is reportedly looking to increase its stake in ChatGPT – an up-and-coming chatbot that responds to queries with human-like responses.
Ad dollars, Alphabet’s biggest source of revenue, are feeling the pressure from companies cutting budgets as consumers cut spending.
“It is clear that Alphabet is not immune to the difficult economic environment, with growing concerns about a US recession,” said Susannah Streeter, analyst at Hargreaves Lansdown.
“Ad growth has stopped boiling…Competition is also heating up, with Alphabet facing a strong rival in TikTok, and Instagram also vying for its sizeable YouTube viewership,” Streeter said, noting that Alphabet has also racked up revenue. billion in regulation. fines.
Evercore ISIS analyst Mark Mahaney said Alphabet’s record headcount created major margin risk for fiscal 2023 and Bernstein analyst Mark Shmulik said the jobs could save the Alphabet company $2.5 billion to $3 billion in costs.
HEAVY WORK CUT
[1/4] The Google LLC logo is seen at the Google Store Chelsea in New York, U.S., January 20, 2023. REUTERS/Shannon Stapleton
Along with Alphabet’s staff cuts, layoffs at four of America’s largest tech companies total 51,000 jobs in recent months. They stoked fears of a recession even as the US labor market remains tight.
“The tech sector is a bit like the proverbial canary in the coal mine,” said Stuart Cole, an economist at Equiti Capital, who believes the tech layoffs signal job security prospects are beginning. finally to become more negative.
Apple (AAPL.O), which has been hiring more cautiously during the pandemic, has so far delayed cuts. On Friday, however, the AppleInsider website reported, citing sources, that the iPhone maker had begun laying off non-seasonal employees in its retail channel at places including Best Buy stores (BBY.N) .
Apple was not immediately available for comment on the report.
‘LITTLE COMFORT’
Alphabet is working on a major AI launch, two people familiar with the matter told Reuters. One of the sources said it would take place in the spring. The New York Times also reported that Google plans to unveil more than 20 new products and a search engine that includes chatbot functionality.
Among those losing their jobs are recruiters, corporate staff and people working in engineering and product teams, Pichai said. Google has cut most jobs in Area 120, its internal incubator for new projects, a company spokesperson told Reuters.
The Alphabet Workers Union said in a statement that the company’s management taking “full responsibility” was “little comfort”.
“It’s appalling that our jobs are first on the chopping block so shareholders can see a few more dots in a chart next quarter,” the union said.
In the United States, where Alphabet has already emailed affected employees, staff would receive severance pay and six months of healthcare as well as immigration support.
Overseas, layoff notifications will take longer due to local employment laws and practices, Pichai said in the memo. Employees in Asia will know from February if the reduction impacts them.
Reporting by Jeffrey Dastin in Davos, Switzerland, Akash Sriram, Deep Vakil, Chavi Mehta, Tiyashi Dutta, Nivedita Balu and Yuvraj Malik in Bengaluru; Editing by Elaine Hardcastle, Alexander Smith, Nick Zieminski, Sayantani Ghosh
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