[rsj_hn]

The "payment" can be taken in the form of higher share price, share buybacks, dividends, future dividends, etc.

It does not have take one specific form or another. Despite the fact that Google doesn't pay dividends, it's not a charity. Investors purchase shares of Google in order to get a return, and they have a choice between buying Google or a mortgage bond or ATT, etc.

Now for growth companies like Google, they are effectively "paying" investors with promises of stock price appreciation and high future dividends. This is why they are more sensitive to stock price declines than income investments like a cable company. It's a two edged sword - they are faster to hire and faster to fire and are more responsive to their share price.

At some point, the growth companies discover they need to start paying dividends or doing regular share buybacks in order to stabilize their price, when their growth story is no longer believed by the market.

[mrj]

Well, so in theory they could have used some of the billions they have on hand to start a dividend to prop up the stock price while making their own decisions about staffing.

This narrative that the market forced them to do layoffs feels flimsy when they have so much money, doesn't it? They had other options.

[rsj_hn]

> This narrative that the market forced them to do layoffs feels flimsy when they have so much money, doesn't it? They had other options.

The options they have is to abandon positioning themselves as a growth stock and say "we are now an income stock". You are right, this is a valid choice.

But think a little about what this would mean for Google. This is a company that has one cash cow -- Search. Pretty much everything else is losing money. But only a small share of Google employees are actually needed to run search. So if they tell the market "We are no longer a growth stock", then why are they spending all this money on money losing projects? The rationale up until now was that these are moonshots where some of them would turn into the next big search. That's what a growth company does, but not what an income generating company does.

So my guess is that Google does not want to transition to being an income earning company because that would require laying off a lot more people. You can lay off 80% of Google's staff and just keep search, and then turn those profits over to investors. Google does not do that because it is still promising growth.

But I agree that at some point, the market isn't going to accept the growth story for Google, and this type of transition will happen. Google has also been sucking up a lot of first class talent and putting them to work on money losing projects without a lot to show for it. Those top developers really belong elsewhere, from an economic efficiency point of view -- they should be working on things that really are legit growth opportunities.

[I_AM_A_SMURF]

I want to note that Google indeed did that. G bought 56bn dollars of its own stock last year (which is equivalent to a 56bn dividend).