TCI Fund Management, an investor in Google’s parent firm Alphabet, has told CEO Sundar Pichai to cut costs by laying off employees. In an open letter to Pichai, Christopher Hohn, TCI’s Managing Director, said that the company needs to adjust to an era of slower growth.
With stakes worth $6 billion, London‐based TCI Fund Management has been an investor in Alphabet since 2017. In the letter dated November 15, Hohn said that the company had “too many employees and cost per employee is too high”. He further said that the “management needs to take aggressive action” to reduce costs.
This letter follows a wave of cost-cutting measures in the tech sector, with Meta and Twitter both laying off thousands of workers, and Amazon reportedly planning to soon follow suit.
Hohn’s letter said, “Our conversations with former executives suggest that the business could be operated more effectively with significantly fewer employees.”
The letter said, “Alphabet pays some of the highest salaries in Silicon Valley. The company has increased its headcount by 20 percent annually since 2017 and more than doubled it since then.”
Alphabet, in late October, said that it planned to cut hirings by more than half. The company is struggling with advertisers cutting back on spending. “Cost discipline is now required as revenue growth is slowing. Cost growth above revenue growth is a sign of poor financial discipline,” the TCI said in the letter.
TCI has demanded that the company reduce its operating losses by at least 50 per cent. TCI also asked Alphabet to disclose operating profit margin targets and reduce losses in its special projects. TCI said that Investments in Waymo were not justified and losses should be reduced. The autonomous vehicle technology unit has generated $3 billion but recorded operating losses of $20 billion so far.