Last Thursday Google co-founder Larry Page was named CEO again to replace Eric Schmidt in April in order to make the search giant more nimble against fierce competitors such as Groupon and Facebook. Typically, a company of Google’s size would get itself into layers of bureaucracy resulting in slow decision making, layered management and scarce innovation. This is how Microsoft got itself into a stagnant technology behemoth of the last decade.
The record of technology company founders who later take on the CEO role is mixed. Mr. Jobs revived then-foundering Apple when he became its CEO in 1997 and has since propelled it to become the world's most innovative technology firm. Others who have tried to pull off the same feat have stumbled. Yahoo Inc. co-founder Jerry Yang led the company between 2007 and 2009, but handed the reins over to current CEO Carol Bartz. Michael Dell, who returned to turn around Dell Inc. in 2007, is still in the process of revitalizing the personal computer company.
According to Google’s official blog, Schmidt will stay as Executive Chairman focusing externally, on the deals, partnerships, customers and broader business relationships, government outreach and technology thought leadership that are increasingly important given Google’s global reach; and internally as an advisor to Larry and Sergey.
Since the middle of 2009, Mr. Schmidt has steered Google into a number of acquisitions such as the $750 million acquisition of AdMob and the $228 million deal for Slide.com. But more recently all of Google’s acquisition efforts have gone south, however. The company is reportedly running into antitrust trouble in its $700 million deal for the online travel company ITA. And Google failed miserably in its attempt to buy the social buying site Groupon for a staggering $6 billion, in what would have been the company’s biggest-ever transaction.
In our opinion, Google will continue to suffer from merger troubles going forward. Convincing founders of an up-and-coming start-up like the next Facebook or Groupon to sell out to a large, bureaucratic firm like Google will be quite difficult. Just like Groupon or Facebook or Zappos, they will always want to make it bigger on their own first. Secondly, with Larry Page, the proud and legendary co-founder, in charge of daily operations such as new product development and technology, any larger acquisition becomes a tough sell internally as it gets in the way of cannibalizing internal efforts to try to put the giant back to its start-up roots. Not to mention, when a technology company full of geek engineers suffers from lack of innovation and commercialization, it becomes virtually impossible for the same group of leaders to acquire a competitor and to smoothly merge with a different culture.
Let’s wait and see how the top management shake-out will play out at Google. Any investors betting on Google to fly high soon with multi-billion dollar acquisitions should watch out how the company executes over the next several quarters first.
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