alphabet

There has been a flurry of layoffs at tech companies and today Alphabet (NYSE: GOOG) also joined the list by announcing plans to eliminate 12,000 jobs. Apple now remains the only Big Tech company that hasn’t announced mass layoffs.

With the layoffs, which are the largest in the company’s history, Alphabet would reduce its global workforce by 6%. Earlier this week only, Microsoft announced that it would lay off 10,000 people which is 5% of its workforce.

In a blog post, Alphabet CEO Sundar Pichai said that it was a “difficult” decision and “I take full responsibility for the decisions that led us here.” He added, “Over the past two years we’ve seen periods of dramatic growth. To match and fuel that growth, we hired for a different economic reality than the one we face today.”

Notably, the job cut announcements from Alphabet, Microsoft, and Meta Platforms have a similar tone. These companies overhired between 2020 and 2022 anticipating that the high growth in the early days of the pandemic would continue.

That, as we know was not the case and Big Tech companies are witnessing a massive slowdown. Take for instance, in the second quarter of 2022, Amazon’s revenue growth fell to a two-decade low.

Meta Platforms reported a YoY fall in revenues in both the second and third quarters of 2022. It was the first time since its IPO that the Mark Zuckerberg-led company posted a yearly fall in revenues. YouTube’s revenues also fell YoY in the third quarter for the first time ever.

Alphabet Announces Mass Layoffs as Tech Slowdown Deepens

Things are looking no better currently as tech companies prepare to report their earnings for the December quarter. Netflix’s Q4 2022 revenues rose only about 1.9% while analysts expect Apple to report a YoY fall in its December quarter sales.

Microsoft is also expected to report a low single-digit rise in its December quarter revenues. As for Alphabet, analysts expect its sales to rise only about 1.7%.

Incidentally, Alphabet had also laid off some employees at Verily, its healthcare subsidiary. However, the quantum was not as massive as the current round of layoffs.

Alphabet’s layoffs come a couple of months after one of its investors TCI Fund Management wrote a letter to the company calling upon the management to lower the workforce.

In the letter, it said, “The company has too many employees and the cost per employee is too high. Management should publicly disclose an EBIT margin target, substantially reduce losses in Other Bets and increase share buybacks.”

Referring to the deteriorating macroeconomic environment, it said, “cost discipline is now required as revenue growth is slowing. Cost growth above revenue growth is a sign of poor financial discipline.”

TCI also said that Alphabet stock is undervalued and the company should scale up buybacks. There is a list of companies that could be undervalued.

Meta Platforms Also Announced Layoffs Last Year

Last year, Meta Platforms also announced mass layoffs weeks after one of its stockholders Altimeter Capital called upon the management to lower the workforce and reduce metaverse investments.

Among others, Altimeter Capital said in its letter that “It is a poorly kept secret in Silicon Valley that companies ranging from Google to Meta to Twitter to Uber could achieve similar levels of revenue with far fewer people.”

Meanwhile, companies ranging from Amazon, Netflix, Tesla, Salesforce, HP, Microsoft, and Meta Platforms have announced layoffs amid the economic slowdown. Apple however remains a notable exception and despite reports of slowing demand for iPhones, the company hasn’t announced mass layoffs, at least until now.

Apple was the best-performing FAANG stock last year and the only one in the pack to outperform the Nasdaq. Warren Buffett loves the stock and Apple is the largest holding for Berkshire Hathaway.

Alphabet Stock is Trading Higher Today

The Oracle of Omaha bought more Apple shares in the first half of 2022. There is a guide on buying Apple stock.

Coming back to Alphabet, the stock is trading higher today after announcing mass layoffs. The market’s reaction to mass layoff announcement has been mixed though. While companies like Amazon and Meta Platforms rose after announcing mass layoffs, Microsoft stock fell after announcing layoffs.

Wall Street is meanwhile positive on Alphabet stock despite the expected disruption from ChatGPT. There is a guide on buying Alphabet stock.

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