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Google cuts contractors, plans to grow

Google Inc. has jettisoned a substantial number of temporary workers in a recent austerity drive spurred by the recession.
/ Source: The Associated Press

Google Inc. has jettisoned a substantial number of temporary workers in a recent austerity drive spurred by the recession, although the Internet search leader still intends to spend billions of dollars during the next two years on product research, development and acquisitions.

The spending plans were outlined in a regulatory filing that also provided some clues about the magnitude of a recent payroll purge targeting Google's legion of contractors and other workers who aren't considered full-time or part-time employees.

The filing to the Securities and Exchange Commission was submitted on Dec. 15, but it was made on paper, leaving it unavailable through the various Web services that track reports to the agency. The Associated Press obtained a copy of the records this week.

A key section of the filing is being kept confidential because Google maintains it contains trade secrets, but the publicly accessible parts provide some information that hadn't previously been disclosed.

For instance, Google revealed it has 24,400 employees, including 4,300 interns, temporary workers and contractors. That contrasts sharply with the roughly 10,000 contractors that Google co-founder Sergey Brin said the company had in October. "It's really high," Brin said in an Oct. 16 interview with the San Jose Mercury News.

Google acknowledged in late November that it planned to significantly reduce the number of its contractors and retain all of its full-time employees.

Although the company's revenue is still rising, Google's growth has been decelerating. The recession has caused consumers to shop less frequently on the Internet and advertisers have trimmed their marketing budgets. Those factors have slowed the money flowing to Google because online ads generate virtually all the company's revenue, which is expected to total about $20 billion in 2008.

To help shore up profits, Google's management has curbed some of the generous employee perquisites that have been a company hallmark for the past decade. It has closed some company cafeterias that serve free meals and last month withheld a $1,000 holiday gift that's traditionally distributed to all employees. Instead, the company handed out free cell phones that run on Google software — a gift that management valued at about $400.

But Google doesn't plan to scrimp on research and development or acquisitions.

In the SEC filing, the company said it expects to devote roughly 18 percent of its annual expenses to research and development during each of the next two years. That's roughly the same percentage as the past four quarters, when its expenditures in the category totaled $2.7 billion.

Google also said it expects to buy other companies at a pace consistent with the past two years, when $4.2 billion in cash went toward acquisitions. Google's $3.2 billion acquisition of online ad service DoubleClick Inc., completed in March, accounted for most of that amount.

"Given the consolidation occurring in the online advertising industry, it is reasonable to expect that Google may in the future spend considerably more to acquire companies in this sector," the company wrote in the SEC filing.

Google is under greater pressure to boost its profits coming off a year in which its stock price plunged by about 55 percent.

In the last four quarters ending Sept. 30, Google said it earned $415 million from its investments, accounting for about 8 percent of its total profit of $4.7 billion during that period. In calendar 2007, Google earned $452 million from its investments, generating nearly 11 percent of its income.