Google founders’ exit signals end of era at search giant

The most remarkable thing about the abrupt exit of Google’s co-founders from the top of the tech giant they spent 21 years building was how low-key it was.

The announcement late on Tuesday that Larry Page and Sergey Brin were stepping down with immediate effect marked the end of an era. Like Jack Ma's departure from Chinese ecommerce giant Alibaba in September, it ushered in a new phase for one of the world's dominant internet empires.

Not since Bill Gates said in 2006 that he was quitting his day job at Microsoft have the founders of a leading US tech company chosen to simply walk away.

Yet shares in Alphabet, Google's parent, actually edged up slightly after the announcement, and most investors and analysts barely blinked at the news.

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"I think that Larry Page and Sergey Brin kind of stepped away from the business quite a while ago – this probably just formalises what has been going on," said Kevin Walkush, a portfolio manager at Jensen Investment Management, an Alphabet shareholder.

Nevertheless, their exit came without warning, and at a time when Google is under considerable internal and external strain. "It certainly surprised me," said Sebastian Thrun, who started Google's driverless car project, and more recently has been running Kitty Hawk, a flying car company backed by Mr Page, adding that Mr Page had given no indication he was planning to step down.

The two men painted their departure as part of a logical progression that had already seen them pull back from direct involvement in running the internet business. On the creation of Alphabet four years ago, they handed management of Google to Sundar Pichai, a top product manager, with Mr Page becoming chief executive of the new tech holding company and Mr Brin its president.

That reflected personal interests that had expanded well beyond Google – even as the internet business continued to generate more than 99 per cent of the group’s revenues, as well as all the cash needed to fund its other activities, from building driverless cars to breaking into healthcare.

Little interest

Previously chief of the internet group, Mr Page had shown little interest in the day-to-day running of the business. Rather, he was transfixed by the chance to pursue technological breakthroughs across a range of industries – a role he was freer to indulge at the helm of the holding company.

"In my opinion, Larry is the Thomas Edison of our time," said Mr Thrun. "He didn't just invent one thing. He wants to be on the bleeding edge of technology, wherever it is."

Mr Brin, meanwhile, had been drawn to Google’s flights of tech fancy at X, the “moonshot factory” he helped set up to incubate its most ambitious new ventures.

He took on a freewheeling role in championing different projects – though a privacy backlash against Glass, the augmented reality glasses he was most closely associated with, showed how Google’s obsession with technological advances could sometimes blind it to human considerations.

As they departed, the founders tried to depict their roles since the formation of Alphabet as only temporary: with other business units operating under separate management teams– even, in some cases, with outside investment and their own boards of directors - a layer of managers at the holding company level was no longer needed.

They will nevertheless stay on the company’s board and remain its controlling shareholders, with 51 per cent of a special class of voting stock, so any significant changes under new management are unlikely.

"You're talking about a change in title, rather than a change in fact," Charles Elson, a professor of corporate governance at the University of Delaware said of the management reshuffle. "They still in effect run the show, that's the key."

But the transition left an inevitable sense of the passing of an era.

“Two college dropouts built one of the biggest companies in the world - it’s remarkable,” said Mr Thrun.

Speculation

And it prompted speculation about whether further streamlining would follow at Alphabet's "moonshot" projects. Under Ruth Porat, who joined as chief financial officer from Morgan Stanley, the company has scrapped some big plans and trimmed others.

Those actions calmed Wall Street’s unease and have reduced the pressure for more action now. Ending an attempt to build a domestic broadband company in the US, for instance, had stemmed the main cash drain, said Jensen Investment Management’s Mr Walkush: since then, he added, shareholders have largely ignored what Alphabet calls its “other bets” to focus on the main moneymaker, Google.

There could still be important longer term consequences of the founders stepping back. They may, for example, follow the path taken by Mr Gates, who has cut back on his personal holding in Microsoft as he pursued more personal projects.

Between them, Mr Page and Mr Brin’s shares give them an economic interest of 11.4 per cent in the company, currently worth $101 billion (€91 billion).

At the age of 46, neither has shown any lessening in the outsized ambitions that led Google’s famous mission statement to organise “all the world’s information”. Mr Page, for instance, “wants to change the world, and he’s a young man”, said Mr Thrun. With no day-to-day management ties any more, he will have more freedom to pour his money and passion into other ventures.

The management shake-up puts Mr Pichai in the hot seat. As head of Google, he has already faced pressure from workers flexing their muscles to shape the company’s direction, as well as external threats from politicians and regulators worried about the internet company’s economic and media power.

More responsibility

In taking on more responsibility – including becoming the head of a public company – Mr Pichai at least has the advantage of being a known quantity. “I think he’s had a lot of good experience,” said Mr Walkush, adding that Mr Pichai and Ms Porat enjoy solid support among shareholders.

But his elevation could also prove liberating. One Google insider said that the extra responsibility could make life easier, since he would no longer need to report up to another layer of management at the holding company level.

With the publicity-shy Mr Page stepping down, meanwhile, Alphabet will be relieved of a question that had started to weigh on it: why its top executive had been so invisible at such a critical time for the company. As Mr Pichai tries to ease the spreading worries about Alphabet’s burgeoning power, he will be firmly in the forefront. – Copyright The Financial Times Limited 2019