Google Curbs Hiring, Cuts Expenses as Growth Slows Ahead of Q2 Results
Google (GOOG) is slated to report Q2 earnings after the market closes on Thursday, July 16 with some analysts forecasting the search giant will be able to offset the downward pressure from foreign exchange rates with tighter cost controls and an uptick in mobile activity.
The company is expected to deliver revenue of $17.75 billion, an 11 percent year-over-year increase but a 1 percent drop sequentially, and per share earnings of $6.69, for a 10 percent rise from the same time last year. Still, it’s a mixed bag among analysts with some cutting their price targets while others remain bullish on the stock, as Investor’s Business Daily reported.
With Google’s sales growth slowing from 29 percent in 2011 to 19 percent in 2014 while operating expenses climb and operating profit margin ebbs, the company has begun to pare back its rate of hiring while looking more closely for ways to cut costs. New chief financial officer (CFO) Ruth Porat, who succeeded Patrick Pichette, is front and center in an effort to reduce costs, examine revenue and accounting systems, and redirect resources, according to a Wall Street Journal report.
One obvious indication of the company’s reaction to slowing growth appears in its rate of new hires. In Q1 2015, Google hired 1,819 new employees, which amounted to the company’s smallest headcount increase since Q4, 2013 and 25 percent below its average quarterly hiring rate, the Journal reported. On average, Google has added 2,435 staffers per quarter and now totals 55,419 employees, the report said.
In addition, Google management is limiting hiring to certain groups based on the vendor’s strategic priorities, rather than allowing across-the-board staffing each quarter, according to the report. In other words, top brass appears to want internal growth to mirror sales growth; Google teams now must submit reports justifying new hires and the positive effect staffing up will have on meeting business goals, including sales targets.
As an example, the Journal pointed to Google’s restricted hiring for its Google+ social media unit at the same time as its Nest smart home division staffed up. Similarly, in an advertising marketing group, Google execs insisted that requests for new hires map to increased revenue plans.