Technology

Alphabet cuts 12,000 jobs after pandemic hiring spree, refocuses on AI

Jan 20 (Reuters) – Google parent Alphabet Inc (GOOGL.O) is cutting about 12,000 jobs as it faces “a different economic reality,” a staff memo said, doubling down on artificial intelligence (AI) and laying off staff supporting experimental projects.

The job cuts affect 6% of its workforce and follow thousands of layoffs at tech giants including Amazon.com Inc (AMZN.O), Microsoft corp (MSFT.O) and Meta Platforms Inc (META.O) which is downsizing after a pandemic-led hiring spree left them slacking in a weak economy.

Shares of Mountain View, Calif.-based Alphabet, which is growing its workforce by nearly a third through 2020 and 2021, rose 4% on Friday. They had fallen 30% in the past 12 months, mirroring a 24% decline in the wider tech industry (.IXIC).

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

Pichai, whose pay was recently tied more closely to performance, said this was a moment to “sharpen our focus, restructure our cost base and direct our talent and capital to our highest priorities,” as Alphabet sought to get its products and more artificial intelligence. , echoing comments from Microsoft who announced job cuts on Wednesday.

Alphabet, long a leader in artificial intelligence, is facing competition from Microsoft, which is said to be looking increase its efforts i ChatGPT – a promising chatbot that answers queries with human-like answers.

Advertising dollars, Alphabet’s main source of revenue, meanwhile, are feeling the pressure from companies cutting budgets as consumers pull back on spending.

“It is clear that Alphabet is not immune to the tough economic backdrop, where concerns about a US recession are growing,” said Susannah Streeter, analyst at Hargreaves Lansdown.

“Ad growth has come off the boil … Competition is also heating up, with Alphabet facing a strong rival in TikTok and Instagram also competing for its important YouTube viewers,” Streeter said, noting that Alphabet also has collected billions in regulatory fines.

Evercore ISIS analyst Mark Mahaney said Alphabet’s record headcount had created major margin risk going into 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 JOBS REDUCED

With Alphabet’s job cuts, layoffs at four of the largest U.S. technology companies have totaled 51,000 jobs in the past few months. They have raised fears of a recession, even as the US labor market remains close.

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

Apple (AAPL.O), who were hired more cautiously throughout the pandemic, have so far held off on layoffs. Friday however website It was reported by AppleInsider citing sources that the iPhone maker had begun laying off non-seasonal workers in its retail channel at places like Best Buy (BBY.N) shops.

Apple was not immediately available for comment on the report.

Approximate number of people who lost or will lose their jobs, as announced by selected companies

‘LITTLE COMFORT’

Alphabet has been working on a major AI launch, two people familiar with the matter told Reuters. One of the sources said it would take place in the spring. The New York Times also reported that Google planned to unveil more than 20 new products and a search engine with chatbot capabilities.

Among those losing their jobs are recruiters, corporate staff and people who work on engineering and product teams, Pichai said. Google has cut most jobs at Area 120, its internal incubator for new projects, a company spokesman told Reuters.

The Alphabet Workers Union said in a statement that the company’s management takes “full responsibility” was “little consolation.”

“It’s appalling that our jobs are on the chopping block so shareholders can see a few more points in a chart next quarter,” the union said.

In the US, where Alphabet has already emailed affected employees, staff would receive severance pay and six months of health care, as well as immigration support.

Abroad, layoff announcements will take longer due to local employment laws and practices, Pichai said in the note. Employees in Asia will learn from February if the reduction affects them.

Reporting by Jeffrey Dastin in Davos, Switzerland, Akash Sriram, Deep Vakil, Chavi Mehta, Tiyashi Dutta, Nivedita Balu and Yuvraj Malik in Bengaluru; Editing by Elaine Hardcastle, Alexander Smith, Nick Zieminski, Sayantani Ghosh

Our standards: Thomson Reuters Trust Principles.

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