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Activist investor pushes for cost cuts at Alphabet Inc

By:
on Nov 15, 2022
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  • TCI Fund Management wants Alphabet to lower its headcount.
  • It's also urging the U.S. tech behemoth to redo compensations.
  • Google shares are currently down more than 30% for the year.

Alphabet Inc (NASDAQ: GOOGL) needs to get “aggressive” in cutting costs and maximising shareholder value, said TCI Fund Management on Tuesday in a letter to CEO Sundar Pichai.

Alphabet should cut jobs

To begin with, the activist investor wants Alphabet to lower its headcount that’s increased at an annual rate of 20% over the past five years. TCI is convinced the Google-parent can “operate more effectively with significantly fewer employees”.

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Its stake in Alphabet Inc is valued at about $6.0 billion or roughly 0.27% of the multinational’s outstanding shares. That makes the hedge fund one of the 25 largest Alphabet investors.

Earlier this month, peers Meta Platforms and Amazon.com Inc were reported considering sizable layoffs. Alphabet, in contrast, has only announced a hiring slowdown so far.

In October, Google reported disappointing results for its fiscal third quarter that Invezz published here. The stock is down over 30% for the year at writing.

What else is TCI proposing?

TCI also wants Alphabet to redo the compensations. In 2021, the tech behemoth had a median annual compensation of nearly $300,000, which the activist investor finds excessive. Its letter reads:

We acknowledge that Alphabet employs some of the most talented and brightest scientists, but these represent only a fraction of employee base. For non-engineering roles, compensation should be in line with other technology companies.

The hedge fund has a bone to pick with unrestrained investments that Google continues to make in “Other Bets” as well, including Waymo – its self-driving unit.  

According to TCI Fund Management, Alphabet Inc should use the money saved from its proposed measures to increase shareholder returns.