A potential recession will not spare many multinationals, that's what investors who are liquidating their positions in tech giants seem to think.
Alphabet ((GOOGL)), the parent company of Google, seems to prove them right. The Mountain View-based, California company is preparing for tough times. Indeed, Sundar Pichai, the CEO, has just warned employees that the company will probably not be spared from a potential recession.
"The uncertain global economic outlook has been top of mind," Pichai said in an internal memo reviewed by TheStreet and confirmed by a spokesperson. "Like all companies, we’re not immune to economic headwinds. Something I cherish about our culture is that we’ve never viewed these types of challenges as obstacles. Instead, we’ve seen them as opportunities to deepen our focus and invest for the long term."
The internet giant and its subsidiary Youtube, for example, could be affected by a reduction in the advertising and marketing budgets of companies seeking to reduce their costs to cope with the drop in consumer and household spending.
To avoid any unpleasant surprises and above all to anticipate a sharp slowdown in the economy, Google will take preventive measures to control its own costs. The internet giant will slow down hiring for the rest of the year in view of a potential recession.
Google Will Slow Hiring
"We’ll be slowing the pace of hiring for the rest of the year, while still supporting our most important opportunities. For the balance of 2022 and 2023, we’ll focus our hiring on engineering, technical and other critical roles, and make sure the great talent we do hire is aligned with our long-term priorities," Pichai announced.
The chief executive officer added that Google needs to be "more entrepreneurial, working with greater urgency, sharper focus, and more hunger than we’ve shown on sunnier days."
"In some cases, that means consolidating where investments overlap and streamlining processes. In other cases, that means pausing development and re-deploying resources to higher priority areas. Making the company more efficient is up to all of us — we’ll be creating more ways for you all to engage and share ideas to help, so stay tuned."
In the past, Google has often been relatively untouched by economic downturns affecting the technology sector. You have to go back to the financial crisis to observe a pause in hiring at the internet giant. But since then, Google has continued to hire. The company had 163,906 employees as of March 31, up 17.1% year-on-year, according to a filing with the Securities and Exchange Commission (SEC).
Google is not the only tech giant that fears the impact of a potential recession. On June 30, Mark Zuckerberg, the CEO of social media giant Meta Platforms ((META)), said that he expects "one of the worst downturns that we've seen in recent history."
Consequently, Meta will accentuate its cost reduction policy. The firm only plans to hire between 6,000 and 7,000 new engineers in 2022, against an initial project of 10,000 new recruits, indicates Reuters. It is therefore a revision of 30% to 40%.
Software giant Microsoft ((MSFT)) is also hedging against a slowdown in the economy by cutting back on the number of employees it hires. Before new positions can be made available, employees need to request permission from the leadership team of Rajesh Jha, executive vice president in charge of Office and part of Windows. Fewer employees that work on the Windows, Office and Teams chat and conferencing software groups will be hired.
