Belt tightening continues in Silicon Valley.
Alphabet (GOOG, GOOGLE) in Monday announced would make cuts to its division, X, which invests in lunar projects, Bloomberg reported.
Bloomberg reported that the company would make "dozens of cuts" to the unit, primarily focused on support staff, suggesting there is still some appetite at the tech giant to find solutions to problems outside its usual purview (read: areas to make money) search. and digital ads.
But in an email to staff obtained by the outlet, Astro Teller, who heads X, wrote that the company is "broadening our approach to focus on developing more projects as independent companies funded through market-based capital."
Teller added: "We will do this by opening our reach to collaborate with a broader base of industrial and financial partners, and by continuing to emphasize efficient equipment and capital efficiency."
Which catches our attention for two reasons.
The first is an Alphabet leader who acknowledges that the terms under which the tech giant agreed to make these investments contained few economic parameters. In its last quarter, Alphabet's "Other Bets" segment incurred an operating loss of 1.2 billion dollars.
It is now the company's prerogative to make these investments. After all, losses are not hidden from shareholders, and perhaps it can be argued that the pioneering spirit of the company, which was founded more as a scientific project than as an effort to make money, is preserved by losing this money almost intentionally. . But it appears this calculus has changed at Alphabet as the company focuses more on AI and a Valley-wide push to cut costs gives the company cover to cut in other areas.
The second notable part of this novelty is as Alphabet plans to continue controlling costs for this unit.
Essentially, the company is outsourcing the discipline to outside investors who will look to earn a return beyond any cultural benefits from their investment. At the end of its most recent quarter, Alphabet employed 182,000 people.
Management teams can say all the right things and implement the right best practices to increase efficiency, etc., etc. But in an organization the size of Fort Lauderdale, it's going to be difficult to steer in a new direction, no matter how forceful its directives are.
And while It will take, as is typical in American businesses, dollars and cents.
Which shouldn't surprise us. After all, culture was part of the reason for X's existence in the first place.
