Google CEO Change Sparks Mixed Feelings Among Analysts

 
 
By Clint Boulton  |  Posted 2011-01-22
 
 
 

Google CEO Change Sparks Mixed Feelings Among Analysts


Google CEO Eric Schmidt's announcement that he is relinquishing his title to company co-founder Larry Page has hijacked the news cycle throughout the tech industry in the last two days.

Schmidt made the news on Google's fourth-quarter earnings call Jan. 20. The news was a bombshell for analysts expecting Google to announce a solid quarter of search ad revenues.

With $6.37 billion in revenue beating Wall Street's expectations of $6.04 billion, analysts certainly got what they expected.

It's the extra jolt they were unsure about: Schmidt's ceding of his CEO role to Page April 4 and assuming the role of executive chairman, where he will be responsible for brokering deals and other duties.

Google's stock fluctuated greatly after the news, but it ultimately closed down nearly $15 to $611.83 Jan 21.

RBC Capital Markets analyst Ross Sandler said he doesn't believe the changes will materially change the day-to-day operations for Google and said they should have minimal impact on Google's ability to execute.

Piper Jaffray analyst Gene Munster, who said investors were unsure how to react to the news, wrote in a Jan. 21 research note:

"We believe the bottom line on the news is that Schmidt will continue to be actively involved in the company and that the transition will likely go smoothly. We view Page as more of a visionary than Schmidt, while Schmidt had more of an operational focus. We don't expect the change to negatively impact operations in any way, but note that it could slightly help inspire the company creatively in the face of more significant competition from Apple, Microsoft, and Facebook."

Technology analysts took more sanguine views. Enderle Group analyst Rob Enderle, a longtime critic of Schmidt, told eWEEK he has viewed Schmidt as a liability at Google over the last few years and "largely failed to do what he was there to do, and that is prevent obvious mistakes."

Enderle believes Schmidt botched Google's handling of censorship troubles with China and was critical of comments Schmidt made about user privacy. Schmidt once claimed that if you who don't want others to know what you are doing, then you shouldn't be doing it.

"I think it became clear that for a company whose primary customer was the consumer, whose primary source of income is advertising, and that sells something they don't own, a low-performing (Novell was hardly a star) enterprise CEO was a bad fit," Enderle said.  

Schmidts Exit from CEO Role Leaves Uncertainty


 

Enderle even criticized Android, the mobile operating system launched under the aegis of Schmidt, because it appears to violate patents now owned by Oracle.

"They should have either bought Sun or Novell to assure they could protect what they created. Now they will either have to pay massive amounts of money to protect Android or exit the market due to litigation pressures," Enderle added.

With Google being challenged in court by Oracle, in the mobile market by Apple and in social advertising by Facebook, Page has his work cut out for him.

Gartner analyst Whit Andrews took the opposite views, arguing that no one has call to point the finger at Schmidt and say he messed up. Instead, he described Page's return to the CEO role after a decade of hanging back as Google's president of products as a new chapter.   

In this chapter, Google must defend its search hegemony and develop its "extraordinary business" across so many places online.

"That does not change the fact that the Facebook era is now upon us," Andrews said. "The Google era has passed. Google as the dominant empire of the Web is not now the case. It's the Facebook moment. They now face the reality of co-existing with Facebook instead of trying to defeat it. Part of its advertising business is focused on doing just that."

While Andrews believes Google is well-positioned on the consumer-facing Web service and ad front, he's less sure about Google's prospects in the enterprise. As an enterprise-minded CEO, Schmidt is well-groomed for pushing Google Apps.

But Page cut his teeth on the consumer cloth, which raises questions about the future of the company effectively marketing Google Apps for businesses. Google's slip here would make Microsoft, with its enterprise clout, the prohibitive favorite for cloud collaboration software.

This will be an interesting year to watch the evolution of Google as it seeks to challenge Apple, Facebook and Microsoft, among others.


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