Investor TCI urges Alphabet to reduce excessive staff and costs

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(Reuters) – Activist investor TCI Fund Management has called on Alphabet Inc to cut costs by cutting its workforce and cut losses at its standalone unit Waymo, saying the Google parent company needs to adapt to an era of slower growth.

The fund, an investor in Alphabet since 2017 with a $6 billion stake, said the company has “too many employees and the cost per employee is too high.”

TCI said Alphabet pays some of the highest salaries in Silicon Valley, noting that the company has grown its workforce by 20% per year since 2017 and has more than doubled it since then.

Alphabet did not immediately respond to a Reuters request for comment.

Shares of Alphabet, which has a market capitalization of $1.24 trillion, rose nearly 5% by midday.

Many technology companies, including Meta Platforms Inc, have recently made significant cuts to their employee base as part of their restructuring efforts to deal with a potential downturn in the economy, after years of rapid hiring. .

Alphabet, which is also fighting advertiser spending cuts, said in late October it planned to cut hiring by more than half.

“Cost discipline is now needed as revenue growth slows. Cost growth outpacing revenue growth is a sign of poor financial discipline,” the fund said in the letter to management and the board. of Alphabet.

TCI also asked Alphabet to disclose operating profit margin targets and cut losses in Other Bets, the unit that includes Waymo and Other Special Projects.

Investments in Waymo were not warranted and losses should be reduced “dramatically”, TCI said, adding that the autonomous vehicle technology unit generated $3 billion but posted operating losses of $20 billion so far. TCI required the unit to reduce operating losses by at least 50%.

(Reporting by Tiyashi Datta and Nivedita Balu in Bengaluru; Editing by Shailesh Kuber)