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Larry Page and Wall Street: Who needs who?
- rudiger 16y agoWhy should Larry Page (a billionaire many times over) have to answer the questions of some loser $100K analysts? I commend Google for not estimating their earnings, offering "guidance", or any of the other bullshit that these analysts need to justify their useless jobs.
- projectileboy 16y agoI'd like to upvote you twice. Warren Buffett has plenty to say about the unholy marriage of corporations and their analysts, consummated with garbage "earnings guidance". Yecch. The quality of the article was lame, at best: "News Flash: Wall Street analysts say people should really pay attention to them, or else."
- meterplech 16y agoThis criticism seems unnecessarily harsh and focused on income. There are real issues here regarding the role of a CEO in working with or talking to analysts and investors. You could make an argument that it serves Google's long-term interest to withhold this information from analysts and their shareholders. Or you could argue that Larry Page should answer to people who own part of his company. I'm not saying one is more right than the other, you just aren't contributing to the discussion by trashing someone based on their income. This isn't about Larry Page vs some "loser $100k analysts" it's about the CEO of a major public tech company and their relationship with their investors.
- loganfrederick 16y agoI had to upvote and add to this comment to emphasize your point. I haven't looked through Google's SEC filings for what Larry's actual comments are, but he does need to remember that it's not "his" company anymore and he is partially a billionaire because Google went public (in exchange for getting public money and boosting the value of his own net worth, Google has been able to use that public funding for its continued growth). He likely would've been rich had Google not gone public, but it did and it'd be hard to argue against the positive boost it has given him. He may not owe it to public investors to give bullshit earnings guidance, but he does owe it to them to answer their questions on how he intends on managing the company and transitively the investor's money.
- rudiger 16y agoThe major shareholders of Google remain inside Google, especially when you consider voting shares.
- asanwal 16y agoSorry but 81% of Google is owned by mutual funds & institutions. 1% is held by insiders http://finance.yahoo.com/q/mh?s=GOOG+Major+Holders http://finance.yahoo.com/q/mh?s=GOOG+Major+Holders This also underscores the fact that this is not Page's company and so while the Street's short-term thinking shouldn't influence him, he should provide shareholders a cogent articulation of his plan/vision.
- theoneill 16y agoGoogle has two classes of stock.
- asanwal 16y agoThat's fine. But let's assume all 81% of institutions hold "less privileged" (likely non-voting) stock, it doesn't matter if they can't vote. They can vote with their checkbooks (allocate investments to other stocks) and that is bad for Google's stock price.
- JanezStupar 16y agoYour comment reminds me of how people set out a company to you know build a legacy, make some money, change the world, whatever. But then this MBA financials guy comes around and shows how with some book engineering you can get 5% more out of your company each year (by cutting costs for example) - and you agree with him. A year later you got 7% out and the company still stands. And then one says, this is good - lets keep doing this, final result - the company is gone 5years from now. I'm not saying that cutting costs, trying to not pay the taxes and massage of investors is stupid and worthless. What I'm trying to say is that Entrepreneurs start out to build companies that do stuff. But sometimes they just get so much into intricacies of "little stuff that matters" that they forget the big picture. So for each action (or at least each major action) an executive should ask himself, how does this make this company better at being a company that does stuff people want. And cliche answer - it will help it because shareholders will get more out of it in short term is one of the worst. So can you please explain to me how lower stock price affects google's ability to do what it does?
- sunchild 16y agoAlso, there is a long, demonstrable history of Wall Street analysts being flat-out liars. They've been caught pumping garbage that their own firms bet against so many times, one wonders why anyone listens to them at all. Larry Page knows what he's doing. Wall Street is the only giant sucking sound.
- redthrowaway 16y agoHow about because that 8% drop in stock price just collectively cost his thousands of employees a significant chunk of money? Larry may not care about the stock prices, but the people who work for him, for whom stock options are a major incentive, certainly do.
- joezydeco 16y agoHopefully those people are also in it for the long term and know that an 8% drop will mean nothing if the earnings and profit grow year-to-year.
- _sh 16y agoFrom the article's tone, it sounds like Wall St is miffed Larry doesn't need it as much as it would like.
- deleted 16y ago[deleted]
- latch 16y agoPlease. That would take too much coordination and agreements between too many people. If they try to hold the stock's price hostage, someone else will just swoop in and make a killing - possibly even Google itself.
- rudiger 16y agoI deleted my comment (that Wall Street firms were threatening to take Google's stock price hostage until Mr. Page acknowledges, and therefore justifies, the existence of their analysts) to avoid hijacking this discussion. However, if you read the article, you'll see that's exactly what they're threatening to do. And given Google's 8%+ drop on Friday, they seem to be doing it rather successfully.
- latch 16y agoI don't see how that was hijacking the conversation..Anyways, until the market opens on Monday (and even more so in the coming weeks), it's impossible to tell who really lost that 8%.
- asanwal 16y agoPage may justifiably dislike Wall Street and their short-term orientation, but he probably does need to detail his vision for shareholders esp the long-term type of investor. Because if that type of shareholder loses faith in the company's direction and Page's leadership and start voting by not buying Google's stock, that will have deleterious impacts. Most obviously, given the talent wars in the Valley, a dropping stock price will not help Google attract top talent vs. pre-IPO companies where the value of options and stock is uncertain and the upside seems and may be higher.
- xiaoma 16y agoI disagree. First of all, share prices are always going to be tied to the fundamental values of a company to some extent. No matter how much an analyst hates a company, if it's generating 50 billion in profits each year, it's clearly worth a market cap of at least a few hundred billion. If Page is right, and is in the process of growing his company to that level over the next ten years, even an analyst who hated the company would be compelled to give it triple, more likely 5-6 times its current valuation. Furthermore, since Google is highly profitable and has no need to ask the market for more investment, it's not beholden to short term share prices. If the stock price were brutally and irrationally hammered, the logical reaction would be to just spend some of their billions in cash to buy back outstanding shares at the irrationally low price. This would concentrate the ownership of all current share holders, thus giving them a both an immediate increase in value per share and an indefinitely larger chunk of whatever profit is being generated. One way or another, the either the valuation will be sufficiently close to reality or the company will just start paying a dividend of which none of the irrational sellers get any. Obviously no established company can compete with the potential upside of a small company which is offering a large stake to early employees and just might make it huge. But a one time fluctuation to share price won't matter in the long run. Remember it's a linear adjustment and growth rates of investments are calculated by taking a geometric mean, not an arithmetic mean.
- asanwal 16y agoI think your comment on share buy backs is not steeped in reality. Moreoever, share price is not always tied to fundamental value of a company. For value stocks, it is. But for tech companies (growth stocks), it is often tied to implied or expected growth. And if Page can't articulate where that growth will come from, the stock price can get hurt.
- jdp23 16y agoit certainly sends a clear message to employees and other stockholders that Larry doesn't see it as important to keep the stock price up.
- latch 16y agoThis somewhat reminds me of a few articles I've read of Jim Sinegal (CEO of Costco). There's a particular good read here: http://www.fastcompany.com/magazine/130/thinking-outside-the-big-box.html http://www.fastcompany.com/magazine/130/thinking-outside-the... Choice quote: "the people in that business [wall street] are trying to make money between now and next Thursday. We're trying to build a company that's going to be here 50 and 60 years from now." This makes me want to work at Google now.
- Synthetase 16y agoI don't see how the vanity of a some analysts affects Google's underlying business. This is exactly the bipolar behavior of the market which has netted people like Buffett a fortune.
- jcampbell1 16y agoDoes google give employees options or just restricted stock? It is a bit demoralizing to have your company's stock tank right after annual bonus options are priced.
- deleted 16y ago[deleted]
- mikealle233 16y agoIt's really starting to look like Google has jumped the shark with making Larry CEO. Google has serious strategic problems going forward, and it seems the best Larry can do is make 25% of employee bonuses tied to chasing Facebook and ignoring investor questions. Making a rags to riches die hard engineer CEO of a multi-billion dollar corporation may seem like a cute idea, but this won't end well.
- tomjen3 16y agoCan you justify your declarations?
- mikealle233 16y agoNo.
- antoinevg 16y agoStock price only starts to matter when a company needs access to more cash than it can generate through sales. Google is currently in a position where they cannot easily continue to increase sales by spending their (enormous) cash reserves. Letting the stock tank a little now reduces the perceptual gap between stock valuation and actual earnings. If that gap is not reduced stock continues to climb while sales growth remains stagnant with the result that, even when engineering investment starts to reflect in sales, unrealistic growth expectations becomes more and more difficult to maintain. I wouldn't be surprised if Larry Page becomes more communicative when/if he can pull off a Steve Jobs and get Google's product development pipeline to the point where the company can reliably maintain sales growth. Right now, boosting investor confidence can only work against him in the long run.
- ntoshev 16y ago> Stock price only starts to matter when a company needs access to more cash I used to think that too, but it's not true. Stock price matters for the existing shareholders, including founders and employees, who may need to cash out for personal reasons. The stock price is an instrument to align the interests of many.
- antoinevg 16y agoThe stock price is an instrument to align the interests of many. I like this definition very much.
- varjag 16y agoIt's the good old hill-climbing: to get out from local optimum to a better condition you inevitably have to descend a bit before you get on the rise again.
- dude_abides 16y agoCan't have put it better. Of course, the obvious caveat is that you may or may not reach a better optimum with this approach.
- spartanfan10 16y ago4 year olds on Wall Street.
- felixc 16y agoI think it's fairly telling that the analysts appeared to treat the decline in stock price as a punitive measure, rather than offering any kind of explanation for why Page's silence means the company is worth less than it was last week.
- Hisoka 16y agoThe message from this article seems a little flawed. Your stock price doesn't go up because you pampered Wall Street analysts, treated them nicely, etc. Your price goes up when you earn billions of dollars more than people expected. It's all about the money, not what you say. Perform well, and investors will care little whether you insulted them. And to be honest, the fact this matters.. what does this say about Wall Street???? It's just a game of impressing people, and not based on what really matters - which is profit?
- scotty79 16y agoCan someone give me a good reason why Google should care what Wall Street guys think and how much they value casino chips that Google gave them to play with?
- brown9-2 16y agoStock price down 8% in a single session based on short-term emotion and reaction? Sounds like a good time to buy.