Sina Science and Technology News On the morning of November 16, Beijing time, it was reported that a few days ago, TCI Fund, the shareholder of Alphabet, Google's parent company, sent a letter to the search giant, saying that Alphabet needed to take "radical measures" to reduce operating costs and the overgrown workforce. The shareholder said that Google also needs to make difficult decisions in the context of the wave of layoffs in the technology industry.
On Tuesday local time, TCI Fund General Manager Chris Hohn sent an open letter to Alphabet CEO Sundar Pichai. Horne said in the letter that Alphabet's management should openly set a profit margin operation target, increase the scale of stock repurchase, and reduce the loss of its breakthrough innovation R&D business.
Horne said that the reason for writing this letter is to express the shareholders' view to the management that Alphabet's current operating costs are too high, and the management needs to take radical measures. Alphabet employs too many employees, and the average cost per employee is too high.
A spokesman for Alphabet declined to comment. After TCI published this letter, Alphabet's share price soared 4.6% to reach the level of $100.14 per share. It is reported that Alphabet's share price has plummeted by 34% since New Year's Day this year.
Online advertising is Google's main business, but this business has begun to suffer a slowdown in the advertising industry. In October, Alphabet, the parent company of Google, released its third quarter financial report, and its operating revenue failed to meet the expectations of Wall Street analysts.
As the global economy is full of uncertainty, the wave of layoffs in the US technology industry is becoming more and more serious. In recent weeks, Twitter and Meta have laid off thousands of employees, and Amazon also plans to implement major layoffs.
So far, Google has not made large-scale layoffs, but previously said that it is slowing down the pace of social recruitment.
TCI, the above shareholder, pointed out that since 2017, the number of employees of Alphabet has increased by 20% every year. Whether compared with the company's traditional employee growth rate or business development needs, such employee growth has been excessive.
Alphabet publicly promised to slow down recruitment. Last month, Ruth Porat, the company's chief financial officer, told shareholders that in the fourth quarter of this year, the number of new employees of the company would be reduced by half compared with the third quarter. But TCI requires more radical measures.
It is reported that as an rights protection investment institution, TCI Fund has previously exerted pressure on other listed companies to promote some reforms or adjustments. For example, the company once competed with the management of "National Railway Corporation of Canada", and finally the company appointed a new CEO this year.
TCI said that it has been a shareholder of Alphabet since 2017, and the market value of its shares in Alphabet is up to US $6 billion.
However, it should be pointed out that radical investors (also known as activist investors) have limited energy to urge Alphabet's management to adjust.
Alphabet adopts a dual equity structure. The two founders Sergey Brin and Larry Page firmly control the company through super voting rights. Technology companies such as Meta and Snap also have special equity structures, and the founders have the voting power to decide their fate.
Alphabet has an innovative R&D business called "Other Gambling", the most typical of which is Waymo, an autonomous car subsidiary. TCI requires Alphabet to reduce the losses of these innovative businesses.
Horne said in the letter that up to now, Waymo has not yet proved that a large amount of investment in the past is worthwhile, and the company's losses should be significantly reduced.
