WSJ: A Very Gloomy Picture Of Larry Page's Short Tenure As Google CEO

http://online.wsj.com/article/SB10001424053111903352704576536521984562128.html

by chugger • 15 years ago

20 24 15 years ago

online.wsj.com

Challenges have piled up for Mr. Page since he assumed his post in April. They include a broad U.S. antitrust probe of the company's practices; the settlement of a long-running criminal investigation into Google's advertising business; and shifting industry forces that led him to make a deal to buy mobile-device maker Motorola Mobility Holdings..

smoody• 15 years ago

If you don't subscribe to WSJ (like me), then you can pull the full article by clicking on it from a google search results page: http://www.google.com/search?sourceid=chrome&ie=UTF-8...

andrewljohnson• 15 years ago

Doesn't work for me... probably have cookies?

nickgeiger• 15 years ago

I deleted all WSJ cookies then clicked the link from the Google search results and it worked.

bostonpete• 15 years ago

Strangely, when I follow your link and click the top link, I still only get 2 paragraphs. If I do my own google search (paste your search query into a fresh google search box), I get the whole article..

ChrisLTD• 15 years ago

You can also "Google" the url and view the cached version.

dmbass• 15 years ago

http://www.google.com/search?&q=For+Google+CEO+Larry+Pag...

Actual Google search link that will work when clicking through to WSJ.

mindstab• 15 years ago

Ha they dropped 9.1% compared to the market's 8.4%? So the only dropped 0.7% below market average. That's really not so much. Sounds like they are trying to make it seem larger by phrasing it that way. The whole article seems a little sensational. A lot of this stuff doesn't have so much to do with him.

yuhong• 15 years ago

Yea, this should be a clue as to who likely wrote this.

ramanujan• 15 years ago

This whole article is quite silly. It puts a negative spin on his tenure as CEO by downplaying the single most important fact: under Page, Google+ actually shipped, and was actually good! Gundotra and Horowitz led the operation, true, but it's hard to believe Larry Page wasn't heavily involved with that.

All the rest is short term ephemera. 9.1% vs. 8.4% is, as you note, nothing. The Motorala deal is for the patents, and they'll probably spin off the hardware end after the deal closes. Expensive but well within Google's budget. As for the $500 million payment, the federal government is suing every company it's not bailing out. Nowadays some sort of federal shakedown is just a cost of doing business in the US, unfortunately. Heck, some guy even recently tried to get Dropbox in trouble with the FTC. You get big enough and you're just a target for all kinds of this stuff.

In his short tenure, Page cleaned house, fired tons of nonperforming "VP Bizdev" types, and catalyzed nothing short of an engineering renaissance at Google. Google+ in particular is tremendous for internal company morale and has stemmed the tide of defections to FB. Page knows what's important, but Amir Efrati, the author of this Journal piece, clearly does not.

ansy• 15 years ago

I think the jury is still out on the Motorola deal. That is a lot of money just for patents. Even for Google's checkbook. And if Google intends to spin off the hardware business expect it to take an even bigger loss on its investment.

If Google+ stemmed defections to Facebook that is a good thing. But hopefully a lot more is in store than what Google+ delivered. It was not nearly enough to undo Facebook's market dominance.

Eric might have found another solution to the Motorola merger if he was heading the company. But who knows if it would have been better. He already passed on both Palm and Sun. Together they would still have been much less than Motorola and probably twice as useful.

chugger2• 15 years ago

I think it's worth explaining exactly why Wall street is not so excited about Google right now.

A company's Return on Invested Capital is the ultimate measure of a company's valuation. Basically, ROIC is a measure of how efficient a company is in using its capital to generate returns.

Let's compare Apple and Google's ROIC. Last time I checked a few months ago, Apple's return on invested capital is 30.4% with 5 year average of 26.1% despite Apple having lower gross profit margins compared to Google. a 30.4% ROIC is amazingly high for a "hardware company". Google's return on invested capital is only 18.3% with 5 year aveage of 17.2%. Now why is that?

Different types of growth earn different degrees of return so not all growth is equally value-creating. Growth strategies based on organic new product development (ie. iPod, iPhone, iPad, iMac, etc.) frequently have the highest returns because they dont require much new capital. Apple can add new products to their existing factory lines and distribution systems, without much capital expenditure. The investments to produce new products are not all required at once. If preliminary results are not promising, future investments can be scaled back or canceled.

Contrast this with Google's growth strategy of acquiring companies (Motorola, Youtube, Android, Doubleclick, etc.). Acquisitions require that the entire investment be made up front. The amount of up-front payment reflects the expected cash flows from the target company plus a premium to stave off other bidders. So even if Google can improve the target company enough to generate an attractive ROIC, the rate of return is typically only a small amount higher than its cost of capital. Factor in the additional traffic acquisition costs and costs of running hundreds of thousands of servers to support Google search, Youtube, Blogspot, GMail, etc. and you'll see why Google's return on invested capital is much lower compared to Apple.

Google also has a habit of wasting money on money-losing initiatives with low ROIC (Google's $280-million solar power initiative, self driving cars, etc.) which further dilutes its average returns. Wall Street perceives the $12.5 Billion Moto acquisition as an expensive and inefficient use of capital that will further dilute the company's ROIC.The recent $500 million settlement with the DOJ is another concern.

and that is why Apple is the most valuable company in the world. Meanwhile, Google's market cap has been stucked in the $170-$200B range for a couple of years or so.

Here's the number one rule of conservation of value: "anything that doesn't increase cash flows doesn't create value".

Estragon• 15 years ago

They're playing to their audience. This is a way to get a nice little schadenfreude fire burning in the hearts of all their readers who think their MBAs actually contribute in some essential way to their business acumen.

wanorris2• 15 years ago

Generally speaking, studying math, English, computer science, or other subjects is considered to contribute to one's knowledge of those subjects.

Is there some reason to think that studying business will not contribute to your knowledge of business?

jonnathanson• 15 years ago

Yeah. This article has the weird feeling of being some sort of hit piece on Page and/or Google. It seems to willfully ignore the successes coming out of Page's tenure (G+ being, if perhaps too early to call, very promising). And it overemphasizes factors largely attributable to market forces, or at least to forces not entirely within Page's direct control.

abbott• 15 years ago

sensationalist (headline, article, author, etc.).

jbooth• 15 years ago

So, apparently the order went out, and with typical news corp subtlety the WSJ is going after Google. Last week the piece with them and Apple, now this.

So who wants to speculate on motivations: Murdoch business interest? Or a sense that Google and Obama are friends?

m0th87• 15 years ago

In his short tenure, he's shipped Google+, coordinated the redesign of several Google properties and reorganized the entire company [1].

Even if he wasn't focused on these long-term projects, it would be foolish to judge him this early on. This piece speaks more about the cynicism of WSJ than of Page & Google.

1: http://latimesblogs.latimes.com/technology/2011/04/exclusive...

chugger2• 15 years ago

I absolutely agree with you but unfortunately, none of those you mentioned are currently creating "value" for shareholders, which is what these short-sighted Wall Street analysts are looking for.

In fact, two things that "destroyed" value (at least in the short term) happened under Larry's watch. 1) 12.5 Billion acquisition of Motorola 2) $500 Million settlement with the DOJ.

Read my other comment below for more details.

yuvipanda• 15 years ago

That didn't sound gloomy to me at all. Quite the opposite, in fact.

saturdaysaint• 15 years ago

It's always been easy to point out a few Google products that essentially own their category and a few more that are dying quietly on the vine. What would really worry me is if that culture of calculated gambles goes away.

WSJ: A Very Gloomy Picture Of Larry Page's Short Tenure As Google CEO

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