Get all your news in one place.
100’s of premium titles.
One app.
Start reading
The Guardian - UK
The Guardian - UK
Technology
Mark Sweney

Major investor calls on Google owner to ‘aggressively’ cut staff and pay

Billionaire Christopher Hohn
Christopher Hohn, founder of TCI: ‘The company has too many employees and the cost per employee is too high.’ Photograph: Peter Macdiarmid/Getty Images

The hedge fund of the billionaire Sir Christopher Hohn has written to Alphabet saying staff at the Google and YouTube parent are paid too much and its workforce should be drastically cut back.

London-based TCI, which has been a significant investor in the company since 2017 and holds a stake valued at $6bn (£5.1bn), has written to its chief executive, Sundar Pichai, urging it to emulate cost-cutting measures introduced by big tech rivals including the Facebook-owner, Meta, Amazon and Microsoft.

“We are writing to express our view that the cost base of Alphabet is too high and that management needs to take aggressive action,” said Hohn, managing director at TCI, in a letter made public on Tuesday. “The company has too many employees and the cost per employee is too high.”

Hohn said Alphabet, which employed almost 187,000 staff at the end of the third quarter, has doubled staff numbers since 2017, with headcount growing at 20% annually across the period.

“This growth is excessive, both in relation to historic headcount growth and what the business requires,” Hohn said. “Our conversations with former executives of Alphabet suggest that the business could be operated more effectively with significantly fewer employees.”

The four-page letter also points the finger at pay, stating that Alphabet offers employees “some of the highest salaries in Silicon Valley”.

Last year, median compensation for a typical Alphabet employee was $295,884 according to filings with the Securities and Exchange Commission (SEC), the letter said. This was 67% higher than at Alphabet’s rival Microsoft and 153% higher than the 20 largest technology companies in the US, according to analysis by S&P Global.

“There is no justification for this enormous disparity,” said Hohn, who added that computer scientists and engineers who can command top pay packets represent only a “fraction” of the employee base. “Many employees are performing general sales, marketing and administration jobs, who should be compensated in line with other technology companies.”

The call for cost savings comes as job cuts come thick and fast at Silicon Valley companies feeling the pressure from a slowdown in the global economy and income streams such as advertising. Last week, Mark Zuckerberg’s Meta, the parent company of Facebook, Instagram and WhatsApp, cut 11,000 staff in the first round of redundancies in the company’s history. On Monday, reports emerged that Amazon was preparing to get rid of as many as 10,000 staff in corporate and technology roles, its largest layoffs ever.

Hohn’s letter also calls on Alphabet to scale back by at least half the huge annual losses being incurred by its “Other Bets” business, which TCI says has made $3bn in revenues but $20bn in operating losses over the last five years.

TCI singled out the self-driving car experiment Waymo, the biggest source of losses in the division, as an area for cutbacks. Unfortunately, enthusiasm for self-driving cars has collapsed and competitors have exited the market,” said Hohn. “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.”

TCI also called on Alphabet to increase its already substantial share repurchase programme to run down its $116bn of cash, given that large-scale mergers and acquisitions are limited owing to regulatory scrutiny. It urged it to copy Apple’s approach and become “cash neutral” over time.

Sign up to read this article
Read news from 100’s of titles, curated specifically for you.
Already a member? Sign in here
Related Stories
Top stories on inkl right now
Our Picks
Fourteen days free
Download the app
One app. One membership.
100+ trusted global sources.