Alphabet cuts 12,000 jobs after pandemic hiring, refocuses on AI

Jan 20 (Reuters) – Google’s parent company Alphabet Inc (GOOGL.O) is cutting about 12,000 jobs as it faces “a different economic reality,” it said in a staff memo. experimental projects.

The job cuts affect 6% of the 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), which are downsizing after a pandemic-induced hiring boom left them limp in a weak economy.

Shares in Mountain View, Calif.-based Alphabet, which has expanded its workforce by nearly a third in 2020 and 2021, rose 4% on Friday. They were down 30% over the past 12 months, following a 24% slump in the broader technology industry (.IXIC).

Sundar Pichai, Alphabet’s boss since 2019, said in the memo Friday that he took “full responsibility” for the decisions that led to the layoffs.

Pichai, whose pay has been more recently tied to performance, said this was a time to “sharpen our focus, redesign our cost base and refocus our talent and capital on our top priorities” as Alphabet looked to imbue its products with more AI, following comments from Microsoft announcing the job cuts on Wednesday.

Alphabet, long a leader in AI, is facing competition from Microsoft, which is reportedly looking to increase its stake in ChatGPT – a promising chatbot that answers questions with human-like answers.

Advertising dollars, Alphabet’s main source of revenue, meanwhile are feeling the pressure from companies slashing their budgets as consumers scale back their spending.

“It is clear that Alphabet is not immune to the difficult economic situation, with growing concerns about a recession in the US,” said Susannah Streeter, an analyst at Hargreaves Lansdown.

“Advertising growth has come off the boil… Competition is also getting fiercer, with Alphabet facing a powerful rival in TikTok, and Instagram also vying for its important YouTube viewership,” said Streeter, noting that Alphabet also has billions earned from regulatory fines.

Evercore ISIS analyst Mark Mahaney said Alphabet’s record number of employees had created major margin risk in fiscal 2023 and Bernstein analyst Mark Shmulik said the job cuts could save the Alphabet company $2.5 billion to $3 billion in costs .

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BIG VACANCIES

With Alphabet’s workforce reductions, four of the largest US technology companies have lost a total of 51,000 jobs in recent months. They have fueled fears of a recession, even as the US labor market remains tight.

“The technology sector is a bit like the proverbial canary in the coal mine,” said Stuart Cole, an economist at Equiti Capital, who believes the layoffs in the technology sector portend job security prospects are finally starting to turn more negative.

Apple (AAPL.O), which hired more cautious staff during the pandemic, has so far postponed the cuts. On Friday, however, the AppleInsider website, citing sources, reported that the iPhone maker had begun laying off non-seasonal employees in its shopping channel in places like Best Buy (BBY.N) stores.

Apple was not immediately available for comment on the report.

Estimated number of people who have lost or will lose their jobs as announced by selected companies

‘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 was planning to unveil more than 20 new products and a search engine with chatbot features.

Among those losing their jobs are recruiters, corporate personnel and those working on technical and product teams, Pichai said. Google has cut most of its jobs at Area 120, its in-house incubator for new projects, a company spokesperson told Reuters.

The Alphabet Workers Union said in a statement that the company’s leadership 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 points on 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 and immigration support.

Abroad, layoff notices will take longer due to local labor laws and practices, Pichai said in the memo. Workers in Asia will learn from February whether the cut will affect them.

Reporting by Jeffrey Dastin in Davos, Switzerland, Akash Sriram, Deep Vakil, Chavi Mehta, Tiyashi Dutta, Nivedita Balu and Yuvraj Malik in Bengaluru; Edited by Elaine Hardcastle, Alexander Smith, Nick Zieminski, Sayantani Ghosh

Our Standards: The Thomson Reuters Principles of Trust.

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