Google announces plans to lay off 200 employees on its sales and marketing teams. The search engine company says some of its organizational areas overlapped in a way that duplicated efforts and complicated decision-making. IBM, Microsoft and other big IT corporations have also been engaged in layoffs as part of restructuring during the recession.
is eliminating 200 employees and showing that even its once sure-fire search
and advertising business model is not immune to the sluggish global economy.
The search engine company announced March 26 that it would be laying off 200
employees from its sales and marketing teams, citing organizational redundancy
as a reason.
Google is the latest big IT corporation to announce layoffs. On March 26,
news reports had IBM
slashing hundreds of employees from its Global Services units.
Dell, Advanced Micro Devices and a host of other IT vendors have also announced
Omid Kordestani, senior vice president of Google's Global Sales and Business
Development, explained the rationale behind the layoffs in a post on the
official Google blog:
Google has grown very quickly in a
very short period of time. When companies grow that quickly it's almost
impossible to get everything right-and we certainly didn't. In some areas we've
created overlapping organizations which not only duplicate effort but also
complicate the decision-making process.
Kordestani cited these overlapping organizations as reducing the "effectiveness
and efficiency" of its sales and marketing teams. Google also "overinvested"
in some areas where it anticipated more substantial growth trends, he said.
With regard to the 200-count staff reduction, "We did look at a number
of different options but ultimately concluded that we had to restructure our
organizations in order to improve our effectiveness and efficiency as a
business," Kordestani wrote. "We will give each person time to try
and find another position at Google, as well as outplacement support, and
provide severance packages for those who leave the company."
In line with what other global IT companies have been experiencing, Google
has found its bottom line affected by the recession. After several years of
accelerated growth, Google
reported net income of $382 million on earnings per share of $1.21 for the fourth
quarter of 2008,
down 68 percent from $1.29 billion on EPS of $4.06 from
the third quarter.
In posting those numbers, Google beat expectations. However, in a
presentation at the Morgan Stanley Technology Conference in San
Francisco on March 3, Google
CEO Eric Schmidt suggested that his company was "not immune" from the
"The next few quarters, things are going to be very, very tough,"
Schmidt told audience members at the time.
"I would think [the layoffs] are just the prudent thing to do; it
doesn't mean Google is in trouble," Karsten Weide, an analyst with IDC,
said in an interview. "Net revenue for Google is going to be a lot lower
this quarter, with [possible growth] of 12 to 13 percent. They've started to
cut back on expenses, and they're working on their cost structure, playing it by
ear quarter to quarter."
Editor's Note: This
story has been updated with commentary from an analyst.