By Julie Bort, Network World |

Google trims workforce, product lines (and investor confidence?)

Now that Google has tackled one side of the ledger via some revenue-generating changes to Apps, it's turning its attention to the other side: cutting expenditures. The company announced it is laying off 100 recruiters, closing three engineering offices and killing or curtailing six product lines. Made all at once like this, the moves make you wonder just how much the ailing economy is affecting Google. Is it just making smart business changes, or is it really struggling as it faces what many expect to be a pretty bleak 2009?

Overall, the cuts seem to be reasonable approaches to Google's changing business climate, vs. kneejerk reactions to the faltering economy. They're all centered on reducing unnecessary overhead while increasing focus on businesses and projects that work. For example, in the blog announcing the recruiter layoffs, Google reiterated that it is still hiring (e.g. Delicious's Josh Schachter), "but at a reduced rate." So fewer recruiters were needed overall.

Similarly, the blog announcing the site closings in Austin, Texas; Trondheim, Norway; and Lulea, Sweden, says there is still work at Google, but the closings are necessary in order to work smarter, i.e.:

"build larger and more effective teams, reduce communications overhead, and give engineers increased options for future projects."

And while Google acknowledged that some engineers may be unable or unwilling to relocate to new sites, it clarified to SearchEngineLand's Danny Sullivan that it doesn't expect to cut all 70 workers affected, and that it plans on replacing any workers who decide to leave Google due to the closures.

And finally, the company ended or curtailed several lagging projects, including porting Jaiku to App Engine and making it open source, shuttering Dodgeball, Mashup Editor and Catalog Search completely, and stopping development on Notebook and uploads to Google Video. Rather than focusing on projects that never caught on (Jaiku, Dodgeball) or had better counterparts already within Google (Google Video, Mashup Editor, Notebook, Catalog Search), the company's decided to cut its losses and focus on where the actual opportunities are: things like Apps, YouTube, Book Search, etc.

The fact that Google announced all these changes in one day however--the same day the stock market took a huge hit a and just a week before Google's Jan. 22 earnings call--is a bit alarming. Does it mean that Google's reported Q4 earnings may be a bit weaker than expected? Guess we'll find out next week. In any event, Google seems to be making smart business moves in a tight economy, and that's the best way to forge investor (and user) confidence over the long haul.

* * *

Like this post? Visit the Google Subnet home page for more news, blogs and podcasts.