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Scrutiny
  
Time to turn a ‘Page’!
Larry Page is a great engineer, but his term at the helm of Google shows that he just doesn’t measure up as CEO. He must abdicate the position at the earliest to allow professional management control
01/03/2012

Larry Page “appears young” for a someone about to cross over to the other side of 40. The same, though, isn’t true for the 13 year-old company he runs! Bloated and slow-moving is what Google has become today, and this obesity has come despite Page’s attempts to reduce flab at the Mountain View giant in the past 9 months since he took over as CEO. The stock market is proof of this – there are clear signs of discontent there. Imagine this – a company records the highest ever topline in history, marking a y-o-y rise of 25.4% in Q4, 2011 ($10.58 billion) and 29.28% in FY2011 ($37.91 billion) and its net income also skyrockets to the highest ever achieved (y-o-y growth of 6.37% to touch $2.71 billion in Q4, 2011, and 14.49% to touch $9.74 billion in FY2011). One trading session after it announces these “record” earnings, its stock price dips by 8.38% – its single-largest fall in a day (another record!). This happened to Google on January 19, 2012. What can you make of the response? Surely, there was some concern that bothered Google’s shareholders. Despite a y-o-y rise in R&D expenses of 37.29% (to $5.16 billion in FY2011 – another record), there has been little in the name of innovation that Page has been able to deliver as a CEO. This is still the concern.

Under Page, the only (meaningful?) innovation that Google put on the table has come in the form of Google+, its social networking bet, which was meant to rival Facebook. Many have today started terming this biggest claim-to-fame of Page in the past ten months as another “freak accident” for Google in the world of social networks. After rising to 50 million in the first three months post launch, Google+ today has only 90 million users. Had the network gained a respectable traction, the user count should have at least crossed the 200 million mark (given that Gmail today has 350 million active users and Google’s websites get 1 billion unique visitors per month!). In comparison, Mark Zuckerberg’s “only” innovation boasts of 800 million users; of which, 50% reportedly use it ‘every day’!

There is another big move that Page went for. He spent $12.5 billion in buying Motorola’s mobility division, which, in any case was a business that is anything ‘but’ thriving. After the tough luck the company has had with hardware (the ‘Nexus’ tragedy) in the past three years, the purchase decision lacks logic to support the move.

Many would opine that it may be too early to judge Page’s actions as a CEO. It is not. First, the very business space his company lives in is one where lean startups outrun industry leaders in a matter of weeks. Also, under him, the company has shut down more than 25 of its initiatives, which were initially believed to become bestsellers (under Schmidt). Some of them are (were) Google Wave, Google Health, Desktop services, Google Labs, Google Gears, Google Search Timeline, Google PowerMeter, Google Bookmarks Lists, Google Buzz, Google Me, Google Circles, Google Friend Connect et al. Page also laid to rest some of Google’s non-traditional initiatives, one of which was the much-hyped alternative (wind) energy project (non-coal; on which it has so far spent $850 million of the $5.5 billion estimated). Truth is: Page’s reign has been more about bad news than good for the company. Since April 4, 2011, both the Nasdaq and S&P 500 have climbed 5%, while the Google stock has practically remained stagnant (rise of 0.1%). The company was held up by the FTC for its dominance in the search market, lost an all important bid with respect to tech-major Nortel’s patents, was forced to shell out $500 million to online-pharmacies as per a court ruling, and its objections to the SOPA bill in recent weeks, have noticeably soured its relations with its large clients in the world of media and entertainment.
The biggest threat to Google today is Google. After more than a decade of innovation, all that has come around as a revenue generator is its online search and display advertising platform (which still contributes to 97% of its annual revenues; as per Wells Fargo, in future, these sources will grow more slowly than in the past). What Page did when he took control of Google was try and make the decision-making process faster (by discouraging discussions over email), cut-short durations of meetings (demanding that any meeting, which lasted more than an hour would have a compulsory ‘bathing’ break) and make Google a leaner online property. However, one can’t forget that he was an engineer 13 years back and he still is. Making a company leaner in 9 months does not only mean relegating patents to the bin, but also reduce inefficient manpower. On the contrary, under him, Google’s headcount has increased by 5% since April last (to 32,467).

Page should do what he does best – be the engineer and hand over the job of maximising shareholder wealth to a real CEO. Not convinced? Like we asked before, think of what he did in the name of innovation since he took over? Actually, there has been a total demise of path-breaking innovation from Google since then. Sour medicine, but Page has to go. Many don’t know this – when Schmidt took over in 2001, it was Page who had stepped down as acting CEO of Google (though his designation read ‘co-President’), in favour of a professional outsider. Getting a fresh brain – anxious about but not disturbed by Facebook’s rally and willing to make more of Google than just an ad-sense related earning machine – to lead Google, would be a move in the right direction. Getting Schmidt back as interim-CEO, and immediately, would be some start.

By:- Steven Philip Warner
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