Why Google’s Plan To Dial Back On Hiring Sounds Ominous?

When the most cash-rich company in the world decides to take it slow, it is definitely something to mull over. Moreover, this is the company that made around 20k hires last year. At 2019-end, Google parent Alphabet (GOOG,GOOGL) had more than 118k full-time employees and the largest headcount additions were in Google Cloud and Search.

Google has hired 4k people so far this year, but will nix plans to match its hiring spree of last year. Instead, the search giant will prioritize hiring in a small number of strategic areas that will address its greatest user and business needs.

Other areas of cutback would include investments in data centers and machines, and non-business marketing and travel…From the company that reported capex of $23.5 billion for 2019, with a major chunk of the investments in data centers, and technology infrastructure…For fiscal 2017, Google’s capex was $13.18 billion. Google has been ramping up capex to support its aggressive growth initiatives.

Last year, Alphabet unseated Apple to become the most cash-rich company in the world. As of Q2-2019, Alphabet held $117 billion in cash and marketable securities, net of debt, vs. $102 billion, for Apple.

So, even the cash king is not immune to Covid-19 repercussions. The pandemic has derailed retail and travel sectors, which in turn cut back on ad spending, hitting Google where it hurts the most. After all, the company used its search engine to build a sprawling ad empire. Retail and travel industries are major ad customers for Google.

When the pandemic pain spreads and businesses struggle to stay afloat, ad spending is likely to take a big hit. Google CEO Sundar Pichai said it best in his email to employees, “The entire global economy is hurting, and Google and Alphabet are not immune to the effects of this global pandemic. We exist in an ecosystem of partnerships and interconnected businesses, many of whom are feeling significant pain.”

Shares of Alphabet Inc. (GOOG) closed yesterday’s trade at 1,262.47, down $6.76 or 0.53%. In the past 52 weeks, the stock has moved between $1,013.54 and $1,532.11.

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