Google sets surprising example for CEO succession

January 20, 2011

By Robert Cyran
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Google has set a surprising example for chief executive succession. Usually it’s the founders that step aside for professional managers. But Google’s young co-founders did that a decade ago. Now, Eric Schmidt’s adult supervision is no longer needed — and Larry Page, who founded the company with Sergey Brin, is ready to run things again. This adds a fresh blueprint for Silicon Valley’s new crop of geniuses.

When Schmidt first stepped in back in 2001, Page was just 28 years old. Page knew enough about Internet search and had enough drive to run the company. But Schmidt had a wealth of experience and contacts. He had worked at Bell Labs and Xerox’s PARC research center. Moreover, he had been chief executive of Novell, a company crushed by Microsoft. Schmidt’s background added a needed hard edge to the relatively idealistic young company.

His skills in execution allowed the co-founders to concentrate on the technology underlying Google. It’s been a happy combination. The company now provides about two-thirds of all Web searches. The company is worth about $200 billion, and its revenue is still increasing at a breakneck pace — the top line grew 26 percent in the latest quarter from a year earlier, according to Thursday’s earnings report.

Page has now learned enough from his mentor to take the keys. And Schmidt will stay on as executive chairman to help provide advice on acquisitions and deal with governments increasingly concerned with Google’s market power.

While the partnership looks happy in retrospect, it is worth considering Google’s near-term future. The company is growing fast and is immensely profitable, but the Silicon Valley arc is looking sharper and shorter than ever. Google is adding employees like mad, yet it is no longer the “it” company. That’s the role now played by companies like Facebook, Zynga, Twitter and Quora. Quite a few of Google’s former hotshot coders have decamped for the pretenders.

Internet companies can fall rapidly from favor — just look at Yahoo’s history. Of course, though, Google is in an incomparably stronger position. And promoting Page will cement its engineering culture to help it withstand its new competitors. Perhaps hungry, youthful rivals could even learn a thing or two from Google’s experience with Schmidt.

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Google stock will lag the market in 2011 but eventually regain in few years.

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