Google to Slow Hiring, Data Center Spend Among Other Cost-Cutting Steps

Mark Bergen (Bloomberg) -- Google parent Alphabet Inc. is slowing hiring for the remainder of the year, the most drastic action by the web search giant since the Covid-19 pandemic began battering its advertising business several weeks ago.

Chief Executive Officer Sundar Pichai told staff about the decision in an email on Wednesday. He also highlighted other areas of cost cutting, saying the company will be “recalibrating the focus and pace of our investments in areas like data centers and machines, and non business essential marketing and travel.”

A Google spokesperson confirmed the memo and added that the company will maintain hiring momentum “in a small number of strategic areas,” while “on-boarding the many people who’ve been hired but haven’t started yet.” At the end of 2019, Alphabet employed 118,899 people full-time.

The announcement shows how the economic downturn triggered by the coronavirus response is even affecting some of the richest tech businesses. Microsoft Corp., the largest software company, paused some recruiting recently, according to Business Insider.

Compared with startups that are firing thousands of workers, Google remains a haven for current employees. But the company’s revenue has likely been hit as businesses slash ad spending to save money. The crisis has hammered the retail and travel sectors in particular, and these are major Google advertising customers.

Related:The Pandemic Tests the Limits of Internet Infrastructure Supply Chains

“The entire global economy is hurting, and Google and Alphabet are not immune to the effects of this global pandemic,” Pichai wrote. “We exist in an ecosystem of partnerships and interconnected businesses, many of whom are feeling significant pain.”

It’s rare for Google to take such steps. The company cut some jobs during the financial crisis of 2009, but in recent years, it has gone on a hiring spree, adding more than 20,000 staff last year. It also reported $23.5 billion in capital expenditures, with a major part of that invested in data centers, computer servers and related items.

Alphabet shares slipped less than 1% in extended trading on Wednesday. The stock closed at $1,257.30 in New York, leave it down 6% so far this year.

Since the coronavirus crisis began, Google has offered $800 million in grants and customer credits, and donated more than 4,000 Chromebook laptops to schools. The company asked staff to work from home globally in March, and has said it is covering wages and benefits for contract employees who work in its offices for a certain period. It has not announced any job cuts.

Related:The Pandemic Puts the Internet’s Resiliency – and Fragility – On Display

Read the full memo from Pichai here.