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This whole article is quite silly. It puts a negative spin on his tenure as CEO by downplaying the single most important fact: under Page, Google+ actually ship

• ansy 15y ago
  I think the jury is still out on the Motorola deal. That is a lot of money just for patents. Even for Google's checkbook. And if Google intends to spin off the hardware business expect it to take an even bigger loss on its investment. If Google+ stemmed defections to Facebook that is a good thing. But hopefully a lot more is in store than what Google+ delivered. It was not nearly enough to undo Facebook's market dominance. Eric might have found another solution to the Motorola merger if he was heading the company. But who knows if it would have been better. He already passed on both Palm and Sun. Together they would still have been much less than Motorola and probably twice as useful.
  • joebadmo 15y ago
    From a blog post[1] I wrote: Nortel: $4.5B / 6,000 patents = $750k per patent. MMI: ($12.5B - $5.5B (cash and assets)) / 14,300 patents = $489,510.49 per patent. Plus 6,700 patents pending. Plus a hardware company. It was a lot of money. But it looks like a pretty good deal against the market rate, if the Nortel deal was any indication. Schmidt is still executive chairman. [1]: http://blog.byjoemoon.com/post/9026076073/google-motorola-and-patents http://blog.byjoemoon.com/post/9026076073/google-motorola-an...
• chugger 15y ago
  I think it's worth explaining exactly why Wall street is not so excited about Google right now. A company's Return on Invested Capital is the ultimate measure of a company's valuation. Basically, ROIC is a measure of how efficient a company is in using its capital to generate returns. Let's compare Apple and Google's ROIC. Last time I checked a few months ago, Apple's return on invested capital is 30.4% with 5 year average of 26.1% despite Apple having lower gross profit margins compared to Google. a 30.4% ROIC is amazingly high for a "hardware company". Google's return on invested capital is only 18.3% with 5 year aveage of 17.2%. Now why is that? Different types of growth earn different degrees of return so not all growth is equally value-creating. Growth strategies based on organic new product development (ie. iPod, iPhone, iPad, iMac, etc.) frequently have the highest returns because they dont require much new capital. Apple can add new products to their existing factory lines and distribution systems, without much capital expenditure. The investments to produce new products are not all required at once. If preliminary results are not promising, future investments can be scaled back or canceled. Contrast this with Google's growth strategy of acquiring companies (Motorola, Youtube, Android, Doubleclick, etc.). Acquisitions require that the entire investment be made up front. The amount of up-front payment reflects the expected cash flows from the target company plus a premium to stave off other bidders. So even if Google can improve the target company enough to generate an attractive ROIC, the rate of return is typically only a small amount higher than its cost of capital. Factor in the additional traffic acquisition costs and costs of running hundreds of thousands of servers to support Google search, Youtube, Blogspot, GMail, etc. and you'll see why Google's return on invested capital is much lower compared to Apple. Google also has a habit of wasting money on money-losing initiatives with low ROIC (Google's $280-million solar power initiative, self driving cars, etc.) which further dilutes its average returns. Wall Street perceives the $12.5 Billion Moto acquisition as an expensive and inefficient use of capital that will further dilute the company's ROIC.The recent $500 million settlement with the DOJ is another concern. and that is why Apple is the most valuable company in the world. Meanwhile, Google's market cap has been stucked in the $170-$200B range for a couple of years or so. Here's the number one rule of conservation of value: "anything that doesn't increase cash flows doesn't create value".
  • ChuckMcM 15y ago
    You can't measure Google with old world style metrics :-) (that was sarcasm of the Googley kind, you see when you work at Google and you say something like "Uh to do that wouldn't we have to violate the 2nd law of thermodynamics?" and someone will respond with "You can't use what you knew before to evaluate Google, we've changed the rulebook and its a whole different universe!") (that was sarcasm of the ex-Googler kind :-) So meta comments aside, this is an excellent insight into the key 'issue' that most investors have with Google, it doesn't provide a return. The reason for that is that a lot of the capital flowing into Google is being spent on speculative ventures, from self driving cars to alternative ways of converting solar energy into power. So billions come in, and they get spent on things which have a zero ROI, on the off chance that one of them will have a huge ROI. Sort of a VC firm wrapped inside of a search company. Using the eponymous self driving car as a reasonable example, seriously, if you have the technology to build self driving cars at a modest premium over manually driven cars you can build a business around that. Automated taxi fleets for example would be a trivial way to disrupt an entrenched market, put a lot of people out of business, and get all that money. Calculating the ROI on that, you go from zero to a lot (I can't find a solid number for cab revenue in the major metro areas sadly, I'm sure the Uber guys know it though). Wall street hates Google for pretty simple reasons, they don't tell them enough to evaluate their business, they have 'golden' (aka Class-A) shares that allow Larry, Sergey, and Eric to out vote all the other shares combined (so there is no share holder leverage) and they don't show any respect to wall street bankers. So far its working in Google's favor, but it is an open question as to whether or not they can keep it up.