An Activist Investor Is Going After Alphabet. Does That Make the Stock a Buy?
A big trend in the technology industry this year has been rationalizing expenses and employee layoffs. Companies like Meta Platforms and Amazon have begun letting large chunks of their employee base go after realizing they hired too many people in 2021 and years prior. So far, technology giant and trillion-dollar enterprise Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) has avoided such layoffs and -- perhaps surprisingly -- has added over 36,000 new employees over the last 12 months.
TCI Fund, a large shareholder of Alphabet stock, recently wrote to its management team in an effort to rein in its employee costs to improve profitability. Does that make Alphabet stock a buy today?
The TCI letter is short, straightforward, and brings up some reasonable points for Alphabet's executive team to consider. First, the fund thinks Alphabet's headcount is simply too high. Alphabet is the owner of assets like Google Search, Google Maps, and YouTube, which are all highly scalable and rely on outside sources to fulfill both supply and demand. Yes, these assets are extremely complex, but TCI thinks they can be run much more efficiently. The evidence is in Alphabet's employee count growth. From 2013 to 2017, employee count grew by 14% annually. But then, inexplicably, from 2017 to the third quarter of 2022, Alphabet accelerated hiring and grew employee count by 20% a year, more than doubling over that time frame.
Source Fool.com
