Larry Page, CEO of Google (NASDAQ: GOOG), believes the company is its own worst enemy. Perhaps he has not looked around at the competitive landscape. Apple (NASDAQ: AAPL), Microsoft (NASDAQ: MSFT) and a few other companies might catch his eye.
Page told Google’s Zeitgeist conference that his firm has not always had the cash it needed to reach its goals, nor the market cap the company probably deserves, according to him. Google does have $35 billion of cash on its balance sheet and adds over $2 billion each quarter. That may only be half of what Apple has, but it still dwarfs the coffers of almost any other public corporation.
It is hard to analyze what Page means. The company’s development management has been unruly. Google has produced programs for shopping and searching images, along with dozens of others that have been a waste of time, at least as far as revenue generation is concerned. The only financial successes Google has had beyond its search business are YouTube and Android. YouTube is only modestly profitable. The jury is still out on Android. The operating system software is free. It has large market share on wireless devices, but it faces a number of patent challenges. That could cost Google several billion dollars and hamper the use of Android by other companies.
Page may mean that Google’s management structure has been poor. Page and the board elevated former CEO Eric Schmidt to the chairman’s position. Many saw him as a bureaucrat, not an executive who drove innovation hard enough. Page has been CEO for less than a year. So far, his tenure has produced nothing that indicates he utilizes Google’s R&D any better than his predecessor did.
The rate at which Google has added new employees concerns Wall St. The company’s excuse is that it needs those people to stay competitive. It is impossible to argue that one way or the other. How is the contribution of 1,000 new people to be measured against the 1,000 who were hired before them? All that can be said is that the Google’s cost base continues to rise rapidly.
Page may want to look beyond the borders of the campuses where his company operates. He may want to wonder why Apple has better sales and earnings than Google does. Or, he may want to wonder what Microsoft will do with its considerable resources. The world’s largest software company may not be light on its feet, but it is motivated to show the world that its time near the top of the tech industry is not over.
Douglas A. McIntyre
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