2022-11-15 Chris Hohn.An open letter to Sundar Pichai

Refer To：《2022-11-15 Chris Hohn.An open letter to Sundar Pichai》。

Dear Sundar,

TCI has been a significant shareholder of Alphabet since 2017. We currently own shares valued at more than \$6 billion, reflecting our strong conviction in Alphabet's future.

自2017年以来，TCI一直是Alphabet的重要股东。目前我们持有价值超过60亿美元的股份，体现了我们对Alphabet未来的坚定信心。

We are writing to express our view that the cost base of Alphabet is too high and that management needs to take aggressive action. The company has too many employees and the cost per employee is too high. Management should publicly disclose an EBIT margin target, substantially reduce losses in Other Bets and increase share buybacks.

我们写此信是为了表达我们的观点：Alphabet的成本基础过高，管理层需要采取积极行动。公司员工数量过多，且人均成本过高。管理层应公开披露EBIT利润率目标，大幅减少Other Bets部门的亏损，并增加股票回购。

Google's Search business has high operating leverage and is not labour intensive. Despite strong revenue growth, operating leverage has been minimal over the last five years. In Q3 2022, total expenses grew 18% year-over-year while revenues grew only 6%. The EBIT margin of the Google Services segment contracted from 39% in 2021 to 32% in Q3 as a result.

Google的搜索业务具有高度的经营杠杆，并非劳动密集型。尽管收入增长强劲，但在过去五年中经营杠杆几乎没有体现。2022年第三季度，总费用同比增长18%，而收入仅增长6%。因此，Google服务部门的EBIT利润率从2021年的39%下降至第三季度的32%。

During a period of high growth between 2017 and 2021, revenues increased at an annual rate of 23%, cost discipline was not a priority. However, cost discipline is now required as revenue growth is slowing. Cost growth above revenue growth is a sign of poor financial discipline.

在2017至2021年的高速增长阶段，公司收入以年复合23%的速度增长，成本管控并非首要任务。然而，由于收入增速正在放缓，成本纪律如今成为必要。成本增速超过收入增速是财务纪律薄弱的表现。

Headcount is too high

员工人数过多

Our conversations with former executives of Alphabet suggest that the business could be operated more effectively with significantly fewer employees. We agree with Altimeter Capital's Brad Gerstner, who wrote: "It is a poorly kept secret in Silicon Valley that companies ranging from Google to Meta to Twitter to Uber could achieve similar levels of revenue with far fewer people."

我们与Alphabet前高管的交流表明，如果员工大幅减少，公司仍可更有效地运作。我们赞同Altimeter Capital的Brad Gerstner的观点，他写道：“在硅谷这是一个公开的秘密：从Google到Meta、Twitter再到Uber，这些公司都可以用更少的人实现相似的收入水平。”

You have publicly stated that Google should be 20% more efficient. We could not agree more. Nearly all technology companies are reducing costs. Meta reduced headcount by 13% last week. Amazon is reducing headcount by 10,000. Microsoft, Salesforce, Stripe and Twitter are also reducing headcount.

你们曾公开表示Google应当提升20%的效率。对此我们深表赞同。几乎所有科技公司都在削减成本。Meta上周裁员13%；亚马逊正在减少1万人；微软、Salesforce、Stripe和Twitter也在减少员工数量。

Alphabet's headcount has increased at an annual rate of 20% since 2017. It has more than doubled since 2017. This growth is excessive, both in relation to historic headcount growth and what the business requires.

自2017年以来，Alphabet的员工数量年均增长20%，总人数较2017年已翻倍。与历史增速和业务实际需求相比，这一增长都过于高企。

Compensation per employee is too high

人均薪酬过高

Alphabet pays some of the highest salaries in Silicon Valley. As detailed in Alphabet's Schedule 14A filing, median compensation totaled \$295,884 in 2021. An analysis by S\&P Global illustrates that median compensation at Alphabet was 67% higher than at Microsoft and 153% higher than the 20 largest listed technology companies in the US. There is no justification for this enormous disparity.

Alphabet在硅谷支付的薪酬居高不下。根据Alphabet提交的Schedule 14A文件，2021年员工薪酬中位数达到295,884美元。S\&P Global的分析显示，Alphabet的薪酬中位数比微软高67%，比美国市值最大的20家上市科技公司高153%。这一巨大的差距毫无正当理由。

We acknowledge that Alphabet employs some of the most talented and brightest computer scientists and engineers, but these represent only a fraction of the employee base. Many employees are performing general sales, marketing and administrative jobs, who should be compensated in-line with other technology companies.

我们承认Alphabet雇佣了一些最优秀、最聪明的计算机科学家和工程师，但他们仅占员工总数的一小部分。大量员工从事普通的销售、市场和行政工作，其薪酬理应与其他科技公司保持一致。

Establish an EBIT margin target

设定EBIT利润率目标

As part of basic financial management, Alphabet should establish and publicly disclose an EBIT margin target for the Google Services segment. We believe an EBIT margin target of at least 40% is reasonable. Almost two-thirds of revenues come from Search, a very strong business with high underlying margins. The Google Services EBIT margin was 39% in 2021 and therefore 40% should be easily achievable through operating leverage and cost cutting. Management compensation should be linked to this target to ensure accountability.

作为基本财务管理的一部分，Alphabet应为Google Services业务设定并公开披露EBIT利润率目标。我们认为至少40%的EBIT利润率目标是合理的。公司近三分之二的收入来自搜索业务，该业务具有极高的内在利润率。2021年，Google Services的EBIT利润率为39%，因此通过经营杠杆和成本削减，达到40%应当轻而易举。管理层薪酬应与该目标挂钩，以确保问责。

Reduce losses in Other Bets

缩减 Other Bets 的亏损

Over the last five years, Other Bets has generated only \$3 billion of cumulative revenues but incurred a massive \$20 billion of cumulative operating losses. Alphabet's investments in Other Bets have been unsuccessful. Alphabet should reduce annual operating losses in Other Bets (which we expect to amount to \$6 billion this year) by at least 50%.

在过去五年中，Other Bets 仅创造了 30 亿美元的累计收入，却产生了高达 200 亿美元的累计运营亏损。Alphabet 在 Other Bets 上的投资并未取得成功。Alphabet 应将 Other Bets 的年度运营亏损（我们预计今年将达到 60 亿美元）至少削减 50%。

The biggest component of Other Bets is Waymo. Unfortunately, enthusiasm for self-driving cars has collapsed and competitors have exited the market. Ford and Volkswagen recently decided to shut down their self-driving car venture, saying: "We have looked at this every way you can and we just see the profitability a long way out." Waymo has not justified its excessive investment and its losses should be reduced dramatically.

Other Bets 中最大的组成部分是 Waymo。不幸的是，人们对自动驾驶汽车的热情已大幅下降，竞争者也纷纷退出市场。福特和大众最近决定关闭其自动驾驶合资企业，并表示：“我们从各个角度评估后发现盈利仍遥不可及。”Waymo 未能证明其过度投资的合理性，其亏损应被大幅削减。

Share buybacks should be increased

应当增加股票回购

We welcome Alphabet's increased share repurchases, which are now at a run-rate of \$60 billion per year. Nevertheless, Alphabet still has over \$116 billion of cash on the balance sheet. Alphabet's large cash balance is serving neither shareholders nor the company.

我们欢迎 Alphabet 提高股票回购规模，目前年化回购金额已达 600 亿美元。然而，Alphabet 资产负债表上仍持有超过 1,160 亿美元的现金。如此庞大的现金余额既未惠及股东，也未给公司带来益处。

Alphabet's ability to pursue large scale M\&A is very limited due to regulatory scrutiny. Alphabet should follow Apple's capital allocation strategy and become "cash neutral" over time through increased share repurchases.

由于受到监管审查，Alphabet 进行大规模并购的能力非常有限。Alphabet 应效仿苹果的资本配置策略，通过增加股票回购，逐步实现“现金中性”。

Alphabet's share price is down 34% year-to-date and the stock is trading on only 16x 2023 EPS. This is based on our estimates adjusted for losses in Cloud, Other Bets and net cash. The stock is very cheap. Alphabet should take advantage of the current low valuation and significantly accelerate share repurchases.

Alphabet 的股价自年初以来已下跌 34%，目前股价仅相当于 2023 年预估每股收益的 16 倍。此估值基于我们对 Cloud、Other Bets 亏损及净现金调整后的测算。该股极为便宜。Alphabet 应利用当前的低估值，大幅加速股票回购。

The stock price matters to your employees, who receive significant stock-based compensation and want the stock to perform for morale and income reasons.

股价对员工至关重要，他们获得大量基于股票的薪酬，希望公司的股价表现良好以提振士气并增加收入。

Summary

总结

In a new era of slower revenue growth, aggressive cost management is essential. We look forward to your announcement of a clear action plan as a matter of urgency.

在收入增长放缓的新时期，积极的成本管理至关重要。我们期待贵方紧急宣布明确的行动计划。

Yours sincerely,

Christopher Hohn

Managing Director

2022-11-15 Chris Hohn.An open letter to Sundar Pichai

2022-11-15 Chris Hohn.An open letter to Sundar Pichai

Headcount is too high

Compensation per employee is too high

Establish an EBIT margin target

Reduce losses in Other Bets

Share buybacks should be increased

Summary

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