Google Inc Adopts Cost-Cutting To Fight Rising Expenses

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Google’s revenues have been increasing at a brisk rate for the last several years, but now the company is facing receding revenue growth, declining profit margins and flat shares. This is forcing the internet firm to restrict hiring and look for new ideas to continue its extensive kingdom effectively, says a report from The Wall Street Journal, which cites recruiters, venture capitalists and others familiar with the matter.

Tough job for new Google CFO

In recent times, Google’s the revenue has slowed while its costs have climbed, resulting in a lower operating margin of 32% from 38% in 2011, says The WSJ, citing Goldman Sachs.

Google’s new chief financial officer, Ruth Porat, who joined in May, has a dynamic approach. Porat, who was responsible for reducing overhead and reallocation of capital during her stint as CFO of Morgan Stanley, is now involved with internal audit examining costs, revenue and accounting systems at Google, says the report. She is finding ways to leave her impression on what has become a more stable but complex firm.

Porat is expected to speak with analysts for the first time on Thursday when the internet firm will release its second quarter financial results, updating investors on its expenses.

Efforts to curtail expenses

Now the internet firm is making efforts to become more economical by limiting hiring and by being more cautious with its expenditure. Apart from this, the firm is also asking for more detailed plans to justify disbursements for things like travel, supplies and holding events, says the Journal.

For the past several years, Google assumed it could hire employees every year, but now executives are identifying specific groups that need hiring based on the company’s strategic objectives. Google’s teams now need to justify the addition of employees in terms of their productivity or achieving specific business objectives such as revenue or increment in the number of users. For instance, last year, Google limited recruitment for the struggling Google+ social media unit, whereas the Nest connected-home unit was given the flexibility to grow, says the report.

Google hired only 1,819 candidates in the first quarter, which is much fewer than last year’s 2,435 and is the smallest since the final quarter of 2013.

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About the Author

Aman Jain
Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at [email protected]

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