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This is completely unsurprising. In fact, I bet you could go back and look at old articles from the business press from decades ago that described similar happ
by tryitnow 11y ago
This is completely unsurprising. In fact, I bet you could go back and look at old articles from the business press from decades ago that described similar happenings in older technology conglomerates.
When I learned corporate finance it was pretty much a given that a conglomerate should trade at a discount.
Now Google is somewhat insulated from share pressures because they have two classes of stock. This makes the owners think they can use it as their personal playground.
But Google will eventually succumb to shareholder pressure. Why? Because so many employees are soooo heavily invested in Google stock. So even if Larry and Sergey want to do all this cool stuff their executive staff is incented to follow the market. And not only the executive staff but employees at almost all levels. Just so much comp is tied to share prices.
Just think if you were a Google exec with your net worth tied up in Google stock and you're charged with making strategic decisions about where to invest Google's capital budget, you're going to be pretty tempted to direct it towards revenue generating opportunities over and above "science fair" projects. Sure, you'll do your best to kowtow to the CEO's personal projects, but ultimately you and your fellow execs are going to behave more like hedge fund managers. And I wouldn't blame anyone who does.
- mathattack 11y agoI agree. Let's point out that none of these divestitures or strategic allocation decisions would happen without Larry or Sergey. As you allude, Google's ability to deliver depends on the share price. While they are free from activist shareholders, they aren't free from competition for talent. A rising stock price keeps employees happy. Employees with lots of out of the money options get jealous when their friends experience IPOs.
- greiskul 11y agoGoogle employees don't get stock options anymore, but "Google Stock Units": https://www.quora.com/What-are-Google-Stock-Units-for-new-hires https://www.quora.com/What-are-Google-Stock-Units-for-new-hi... So although the stock price rising makes everybody happier, there is no such problem of out of the money stocks.
- dastbe 11y agoFor the rest of the world, we just call them Reserved Stock Units. The OPs point still stands regardless; unless for whatever reason you think you'll get 1) a windfall of stock grants that are 2) calculate from some actual monetary amount divided by the current stock price, you want the value of your stock to go up.
- refurb 11y agoReserved stock unit? Do you mean restricted stock unit? RSU?
- dekhn 11y agoYes, google GSUs = RSUs.
- chii 11y agowhat exactly is RSU? What's the difference between it, and stock you buy from a broker on the market?
- refurb 11y agoAn RSU is like an option with a strike price of $0. You receive the option to puchase stock (with vesting). This is in contrast to actually purchasing a stock on the market.
- chii 11y ago> to purchase stock [via] vesting So when the rsu has vested, it is converted to normal stock, where you can sell on the market for cash?
- benlangmuir 11y agoYes. It's just stock on a vesting schedule.
- CamperBob2 11y agoAs you allude, Google's ability to deliver depends on the share price. While they are free from activist shareholders, they aren't free from competition for talent. Starting up interesting long-term projects and then canning them at the first sign of a cloudy quarterly forecast is not how you compete for top talent. It just makes the entire company look spastic and irresolute. Google/Alphabet is in a good position to build the next Bell Labs. Instead, they're building the next Lucent. That's a bummer.
- yongjik 11y agoCounterpoint: The majority of Google employees aren't anything near "heavily invested" in Google stock. Sure, they get some, but the amount is dwarfed by their regular salary and bonus. For them, stock is "nice to have", but not a big deal. In fact, I'm pretty sure most of them would rather say "Who cares about stock price? Let's do some cool stuff!" I think most Google employees would fall into either (1) those who don't have enough stocks to care much about stock price, and (2) those who have too much money to care.
- xyzzyz 11y agoI'm just a lowly Google engineer, but my stock grant is already way over 50% of my base salary. In other words, the stock is somewhere between 1/3 and 1/2 of my total compensation, based on today's price.