GOOGL to Cancel Half the Projects and Its Internal R&D Group, Area 120 – Playing into CEO’s plan to be 20% more efficient, the company halved its AI targeted incubator, as half the teams working on new product innovations heard their projects were being canceled. Previously, there were 14 projects housed in Area 120, and this has been cut down to just seven. Employees whose projects will not continue were told they’ll need to find a new job within Google by the end of January 2023, or they’ll be terminated. Link
Just looking for interpretation
I’ve read speculation that it is an attempt to improve margins by reducing costs. I get that improved margins are a good thing, but I think cutting R&D is a bad thing. For any company, not just Google. There may be more to it than that, but I would cut executive compensation and perks before I cut R&D and let a bunch of really bright people go.
If I recall, Google has had periodic cleansing of the “wild and crazy” projects their people undertake from time to time. A small fraction of those projects come to fruition and turn into something, most do not (just like the real world.)
Since we don’t have any insight into which projects were terminated and which were kept alive, you just have to go on the assumption that each was evaluated for its future potential and some made the grade and some did not. If you trust management, then trust management.
There are some projects which deserve to die a quick and ugly death, but if you let the people whose jobs depend on those projects decide - then they will live forever. Of course there’s another side too. Recall PARC where the mouse and GUI were developed but never got out of the lab until Steve Jobs walked by. So my comments are not any kind of real guidance except in the overall sense, and in any event I expect the monetary results to be too small to matter in the short term, and too opaque to matter to us as long term investors.