Investor Calls on Google Parent Alphabet to Cut Costs
Investor TCI Fund Management has called on Google parent company Alphabet to reduce its headcount, lower its compensation and cut its losses in self-driving car project Waymo and related efforts.
In a letter addressed to Alphabet CEO Sundar Pichai and posted on TCI’s website, TCI Managing Director Christopher Hohn said that during the most recent quarter, Alphabet’s total expenses rose 18% year over year while its revenues grew only 6%.
TCI said in the letter that it owns $6 billion worth of Alphabet shares.
Hohn added that, as a result, cost discipline is now required in a way that it wasn’t over the previous five years when Alphabet’s revenue grew 23% a year.
“However, cost discipline is now required as revenue growth is slowing,” Hohn wrote. “Cost growth above revenue growth is a sign of poor financial discipline.”
For example, Hohn wrote that Alphabet could be run with “significantly fewer employees” and noted that tech companies Meta, Amazon, Microsoft, Salesforce, Stripe and Twitter have been reducing their headcounts.
Saying that Alphabet pays some of the highest salaries in Silicon Valley, he added that employees in sales, marketing and administrative jobs should be paid salaries comparable to those with other tech companies.
In addition, Hohn wrote in the letter that Alphabet’s Other Bets segment — the largest portion of which is Waymo — should have its annual operating losses cut in half. Over the last five years, Other Bets’ cumulative revenues have totaled $3 billion while its cumulative operating losses have added up to $20 billion.
“In a new era of slower revenue growth, aggressive cost management is essential,” Hohn wrote, addressing Pichai. “We look forward to your announcement of a clear action plan as a matter of urgency.”
Alphabet did not immediately respond to PYMNTS’ request for comment.
As PYMNTS reported Oct. 26, news that the search giant saw its third-quarter sales growth slow to 4% from a blistering 43% pace a year ago did not sit well with investors.