Jan 20 (Reuters) – Google parent Alphabet Inc ( GOOGL.O ) is cutting about 12,000 jobs, or 6% of its workforce, it said in a staff memo on Friday, as the sector of technology goes back from layoffs and companies own their future on artificial intelligence (AI).
Alphabet shares rose nearly 3% in premarket trading.
The decline comes at a delicate moment for the American company, which has long been a leader in key areas of AI research.
Alphabet is now facing a challenge from Microsoft Corp ( MSFT.O ) in a branch of technology that can, for example, create virtually any content that a user can think of and type into a text box.
Microsoft this week said recession worries were forcing it to cut 10,000 jobs, less than 5% of its workforce, and would focus on imbuing its products with more AI going forward – – a point that the CEO of Alphabet Sundar Pichai repeated in the memo.
Alphabet has faced a “different economic reality” since the past two years when it rapidly expanded its workforce, decisions for which Pichai said he took “full responsibility.”
Pichai became CEO of Alphabet in 2019.
Still, he said, Google was preparing “to share some completely new experiences for users, developers and businesses,” and the company has “a substantial opportunity ahead of us with AI in our products.”
The company has been working on a major AI launch, two people familiar with the matter told Reuters. One of the sources said that it will take place in the spring of this year.
Susannah Streeter, an analyst with Hargreaves Lansdown, said Alphabet’s advertising business, which underpins the Google search engine and YouTube, has not been immune to economic turmoil.
“Ad growth has come off the boil, a stark contrast from the busy post-pandemic reopening days that saw a surge in consumer spending,” she said. The company faces competitive and regulatory threats as well, she said.
It was unclear whether Alphabet would take a one-time financial charge related to the job cuts. Microsoft’s severance packages, lease consolidation and hardware line changes will cost it more than $1 billion, he said earlier this week.
Alphabet’s layoffs followed a review of its people and priorities, which led to workforce reductions affecting various geographies, Pichai said. Among those losing their jobs are recruiters, corporate staff and people working on engineering and product teams, he added.
In the United States, where Alphabet has already sent an email to affected employees, staff will receive severance and six months of health care as well as immigration support.
A person who said he used to work on Google’s Chrome browser posted on Twitter that he had lost his job even as he stepped into a leadership position on a project.
Additionally, layoff notifications will take longer due to local labor laws and practices, Pichai said in the memo.
Reporting by Jeffrey Dustin in Davos, Switzerland and Akash Sriram; Editing by Elaine Hardcastle and Alexander Smith
Our Standards: The Thomson Reuters Fiduciary Principles.