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Activist Investor Calls Out Alphabet To Follow Suit With Other Tech Giants, Cut Costs

Benzinga · 11/16/2022 07:43

London-based activist hedge fund TCI Fund Management has called out Google parent Alphabet Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) to cut costs substantially, claiming the company would be more efficient with fewer employees.

The activist investor also called to reduce losses in long-term bets such as the self-driving car unit Waymo.

Mr. Hohn said Alphabet should make the suggested changes as soon as possible, pointing to recent decisions by other big technology companies.

Facebook parent Meta Platforms Inc (NASDAQ:META) announced 11,000 job cuts a few days ago, around 13% of the company's total workforce.

TCI, which owns worth more than $6 billion shares, wrote a letter to Alphabet's CEO, Sundar Pichai, requesting cost cuts, says Wall Street Journal

"We are writing to express our view that the cost base of Alphabet is too high and management needs to take aggressive action," TCI wrote in the letter, signed by Managing Director Christopher Hohn. "The company has too many employees and the cost per employee is too high."

In an interview, Mr. Hohn said he had previously shared TCI's concerns with Alphabet's management and expected the board, including Google co-founders Sergey Brin and Larry Page, would be receptive to the suggestions. He said TCI didn't plan to seek a board seat.

"The founders, Sergey and Larry, are clever people, and they will realize that for the company to be successful, it has to be healthy," Mr. Hohn said. "A highly bloated cost base doesn't serve the ability of a company to reinvest and for the stock price to appreciate."

Google reported the first recorded annual drop in advertising sales on its YouTube video platform in Q3.

Price Action: GOOG shares are down 0.25% at $98.47 during the premarket session on the last check Wednesday.