Google CEO Faces Difficult Premiere
By AMIR EFRATI
When Google Inc. co-founder Larry Page announced that he would take over as chief executive earlier this year, he promised that he would shake up the Internet search giant to speed up decision making. Instead, much of the shaking up has happened to the new CEO.
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 Inc. Since he took on his new role, the company's stock price has declined 9.1%, compared with a drop of 8.42% for Nasdaq stocks as a whole.
Last week, federal prosecutors who had investigated Google's practice of allowing ads from illegal online pharmacies on its Web search engine between 2003 and 2009 singled out Mr. Page. They said he had personal knowledge of the alleged crime and failed to prevent it. The federal prosecutors made their comments after Google paid $500 million last week to avoid criminal charges.
A Google spokesman declined to comment on what Mr. Page did or didn't know of the ad practices. He added that "the investigation was not related to current advertising practices and that the company was moving on." The company declined to make Mr. Page, 38 years old, available for comment.
Other setbacks have included a failure to reach a deal with music labels that would let Google's new Internet music service sell songs and albums; a public disclosure by the company in June that China-based "bad actors" spied on Gmail accounts, and the failure to win a July auction for Nortel Networks Corp.'s technology patents, which Google said pushed it to make its purchase of Motorola.
But according to colleagues, Mr. Page has dealt with the eventful past few months by focusing on matters within his control, including positioning Google in new lines of business.
"Larry's very aware of all the things that are playing out internally and externally, and he cares about it," said Sundar Pichai, who leads Google's Chrome browser and operating system. "While he takes all that into his mind, the way he approaches work is with a strong focus around products and users."
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There have also been positives. His reorganization of the company was largely well-received by employees; in April, the government approved Google's purchase of ITA Software, which will help Google build a travel-search service; and Google+, the company's fledgling attempt at social networking, has seen early growth. Employees also credit Mr. Page with facilitating a change in the look of numerous Google's services, including the search engine and Gmail.
Mr. Page has also learned from criticism. Amid questions about Google's growth rate, Wall Street analysts had griped in April that they didn't hear enough from Mr. Page on his first earnings call. During that call, the new CEO said he was "really excited" about the company's performance and prospects but didn't discuss his strategy or stay to answer questions from analysts.
But on the July quarterly call, which followed stronger results, the new CEO spoke extensively about his strategy. Among other things, he said Google would have no trouble finding ways to make money from the growth of its Chrome Web browser, YouTube video site and Android mobile-operating software, which powers more than 135 million devices world-wide.
Google is "only at 1% of what is possible" and "that is why I am here working hard to lead the company into the next level," Mr. Page said during the call.
Jordan Rohan, an analyst at Stifel, Nicolaus & Co., said Mr. Page "has been a pretty quick study" in communicating with investors. "It's clear that Larry Page isn't satisfied with Google's dominant position in Web search and intends to broaden the areas of dominance," Mr. Rohan added, even though that is inviting more government scrutiny and "bumps in the road."
Internally, numerous Google employees say Mr. Page enjoys a broad base of support. Over the past few months, he has tried to shake up the company as he promised he would, clarifying lines of accountability and priorities through a broad reorganization. In addition, he eliminated projects that didn't contribute to those priorities.
Larry Page in April reorganized Google into seven product areas.
- Android: mobile-operating system, Google Music
- Web search: Google.com
- Commerce & Local: Google Wallet, Google Offers; Google Maps; Google Books
- YouTube: video site, Google TV
- Social: Google+ social network
- Chrome: Web browser/laptop OS; Google enterprise apps
- Ad products: Web-search ads, DoubleClick ad exchange, AdMob mobile ads.
Mr. Page has also taken an interest in newer products, such as local-business advertising initiatives and Google+, the social-networking and Facebook Inc. rival whose performance Mr. Page has tied to the size of employee bonuses this year.
With employees, Mr. Page has tried to shed his image as an introvert. Several weeks after Google+ was launched, he helped organize a July "beach party" at Google's Mountain View, Calif., headquarters, complete with a high-tech wave-making machine, said people familiar with the matter.
Colleagues also said that Mr. Page has been surprisingly adept at communicating with employees, including at product-related meetings, during Friday afternoon "TGIF" all-hands meetings, and through several-minute-long videos posted on his internal Google+ account.
Still, the external headaches have forced Mr. Page to respond quickly. Earlier this summer, Google said it was facing a broad Federal Trade Commission investigation into its practices that could take years to resolve.
Following that disclosure, Google in July made changes to the way its search engine displays information about local businesses, which is among the issues the FTC is investigating, according to people familiar with the matter.
Meanwhile, the growing competition in the mobile arena pushed Mr. Page to bet big by announcing this month that Google has agreed to buy Motorola for $12.5 billion, the Internet search company's biggest-ever deal.