Shulou(Shulou.com)11/24 Report--

Thanks to CTOnews.com netizen wit clue delivery! Activist investor TCI Fund Management sent a letter to Google parent Alphabet CEO Sundar Pichai on Tuesday, demanding that the latter must cut employee headcount and salary expenses through "positive action" and provide investors with a clear action plan.

TCI owns a $6 billion stake in Google's parent company, second only to Alphabet's top 20 shareholders. TCI holds 0.27% of Alphabet's outstanding shares, according to FactSet, a market research firm, and the fund has been steadily increasing its holdings since 2017.

However, Alphabet's proxy report filed in 2022 shows that the company owns three types of stock, and co-founders Larry Page and Sergey Brin still have solid voting control due to almost complete ownership of Class B stock. As a result, activist investors have limited ability to force Alphabet to change.

Chris Hohn, managing director of TCI, wrote in a letter to Pichai that management should publicly set profit margin targets, increase share buybacks and reduce losses on other portfolios (the company's high-risk projects).

"We are writing to express our view that Alphabet's cost base is too high and management needs to take aggressive action," Horn said in the letter. The company has too many employees and the cost per employee is too high. Our conversations with former executives show that businesses can operate more effectively with significantly fewer employees. "

The TCI letter refers to an open letter sent to Meta by longtime shareholder Altimeter Capital arguing that tech overstaffing is a "well-known secret" in Silicon Valley.

Google, an advertising giant, is already under pressure from a slowdown in digital advertising, with parent company Alphabet reporting third-quarter results in October that showed revenue and profit below expectations.

2022 is a painful year for tech employees. Earlier this week, media reports said Amazon was preparing to lay off 10,000 people. Meta laid off 11,000 workers last week. Alphabet is one of the few big tech companies that still haven't laid off workers. But Pichai did announce a hiring slowdown in leaked internal memos.

TCI noted that since TCI first disclosed its stake in Alphabet in 2017, the latter's workforce has grown at a rate of 20 percent annually. The TCI believes a compound annual growth rate of 20 per cent is "too high."

TCI also took aim at Alphabet's compensation, which has traditionally been the "gold standard" for tech companies. Alphabet disclosed median employee compensation of $295884 in 2021.

The letter continued: "We acknowledge that Alphabet employs many of the most talented and intelligent computer scientists, but these people represent only a small fraction of the total number of employees. For non-engineering employees, pay should be lowered to "align with other tech companies," the letter added.

TCI advocates increasing share buybacks and establishing EBIT targets for Google's services business. EBIT is a measure of a company's operating profit as a percentage of revenue. Google Services 'EBIT margin for 2021 was 39%. According to TCI,"a profit margin target of at least 40% is reasonable. "

Notably, TCI argued that Google's "other bets" category needed more attention, noting that Waymo, the self-driving car subsidiary, failed to justify "its excessive investment." Facebook parent Meta is facing similar calls from Altimeter Capital, which advocates slashing fees at Reality Labs, its VR division.

Alphabet shares closed up 2.8 percent at $98.72 percent on Tuesday. Alphabet's stock price has fallen more than 30% so far this year.

Welcome to subscribe "Shulou Technology Information " to get latest news, interesting things and hot topics in the IT industry, and controls the hottest and latest Internet news, technology news and IT industry trends.