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

Jan 20 (Reuters) – Google’s parent Alphabet Inc (GOOGL.O) It is cutting about 12,000 jobs as it faces a “different economic reality,” which, in a staff memo, is doubling down on artificial intelligence (AI) and cutting staff to support testing programs.

The job cuts affect 6% of its workforce and follow thousands of layoffs at tech companies including Inc. (AMZN.O)Microsoft Corp (MSFT.O) and Meta Platforms Inc (META.O) Those who are downsizing after a pandemic-led hiring frenzy left them reeling in a weak economy.

Shares of Mountain View, Calif.-based Alphabet, which plans to raise its workforce by nearly a third through 2020 and 2021, rose 4% on Friday. They fell 30% over the past 12 months, echoing a 24% decline in the broader tech sector. (.IXIC).

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

Pichai, who recently tied his pay more closely to performance, said it was a moment to “sharpen our focus, realign our cost base and direct our talent and capital to our highest priorities,” as Alphabet sought to imbue its products with more AI. , echoing the sentiments of Microsoft, which announced the job cuts on Wednesday.

Alphabet, a long-time 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 pressure from businesses slashing budgets as consumer spending pulls back.

“It is clear that concerns about the US recession are not immune to the harsh economic backdrop,” said Susanna Streeter, analyst at Hargreaves Lansdowne.

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“Ad growth has heated up…competition has also heated up, with Alphabet facing powerful competition from TikTok and Instagram competing for its critical YouTube audience,” Streeter said, adding that Alphabet has also poured billions into regulation. Penalty.

Evercore ISIS analyst Mark Mahaney said Alphabet’s record-high numbers created major margin risk in fiscal 2023, and Bernstein analyst Mark Shmulik said the job cuts could save Alphabet $2.5 billion to $3 billion in costs.

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Big job cuts

Along with Alphabet’s staff cuts, a total of 51,000 jobs have been cut at major US tech companies in the past few months. They have fueled fears of a recession even as the US job market tightens.

“The tech industry is like the proverbial canary in the coal mine,” said Stuart Cole, economist at Equiti Capital, who believes tech layoffs mean the outlook for job security is finally starting to turn more negative.

Apple (AAPL.O)Employed more prudently through the pandemic, it has so far held off on cuts. Friday, however, the website AppleInsider reported The iPhone maker has begun laying off off-season employees in its retail channel at places like Best Buy, citing sources. (BBY.N) Shops.

Apple was not immediately available for comment on the report.

Estimated number of lost or losing jobs reported by selected companies

‘Small Comfort’

Alphabet is working on a major AI launch, two people familiar with the matter told Reuters. It will take place in the spring, said one of the sources. The New York Times reports that Google plans to launch a search engine with more than 20 new products and chatbot features.

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Those losing their jobs include recruiters, corporate employees and those working in engineering and product teams, Pichai said. Google has cut most jobs at Area 120, an incubator for new projects, a company spokeswoman told Reuters.

The Alphabet workers union said in a statement that it was “little consolation” that the company’s leadership was taking “full responsibility”.

“It’s staggering that our jobs are the first to be cut, so shareholders could see a few more points in the next quarter,” the union said.

In the U.S., if Alphabet has already sent the email to affected employees, employees will receive severance pay and six months of health care and immigration support.

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

Report by Jeffrey Dast in Davos, Switzerland, Akash Sriram, Deep Vakil, Savi Mehta, Dyashi Dutta, Nivedita Balu and Yuvraj Malik in Bangalore; Editing by Elaine Hardcastle, Alexander Smith, Nick Zieminski, Sayantani Ghosh

Our Standards: Thomson Reuters Trust Principles.

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