January 24, 2011 | In: Opinion

Why Is Larry Page Replacing Eric Schmidt?

Google took a surprising decision last Thursday: Eric Schmidt will no longer be the CEO of Google as of April of 2011 (which means he still has just a little over two months). Eric will be replaced by Larry Page, a Google co-founder.

In less than a decade, Schmidt transformed Google from a helpful search tool designed by philanthropic geeks into a colossal (and feared) company with billions in revenue every month. Since 2001, Schmidt made sure that Google was always a pioneer in the search area with a consistent growth year over year. Obviously, the man was doing an excellent job, so why did Google do that?

Here’s what I read between the lines in Schmidt’s announcement of handing off power to Larry on the Official Google Blog:

– There is a definitely a rift between the co-founders and Schmidt. The way he was recommending Larry was a bit questionable. Why will Larry be better than him? Just because Larry is “ready to manage” does not mean that Larry will manage the company better (as claimed in the blog post). We’re talking about one of the biggest companies on this planet.

– Schmidt said that the main reasons for him leaving his post are “simplifying the management structure at the top” and “speeding up decision making”. Hmmm… “Simplifying management structure at the top?” You are only 3 people at the top, how can it be any simpler? Why was it “not simple” in the first place? Now “speeding up decision making” is another proof that there’s definitely a problem between Larry and Sergey on one side (who, by the way, have shared the same office since Google’s inception), and Eric on the other. “Speeding up decision making” only means that when it comes to strategic decisions, Eric and the co-founders are not on the same page. This was reflected last year in Google’s childish and inconsistent management of the Chinese mess, where Sergey apparently defied the standards of business in large companies, and consequently Schmidt, and handled this problem in his own way, in his very “personal” way. Sergey decided to defy China and drop any censorship on the google.cn website, effectively losing the fastest growing Internet market in the world and surrendering it to competitor Baidu (a company that was really, really grateful to Sergey).

– Eric is not an old man, he doesn’t need to retire, he doesn’t need to lessen his responsibilities, and he doesn’t need to be replaced by a younger man, who is clearly an introvert. Now I have nothing against introverts, they’re great a producing things, but they’re not very good at management (as it’s all about communication).

– Eric assures readers, that he will stay in the company for a long time, but in a different role, while still advising Larry in strategic decisions. Maybe this is an assurance for investors, and not readers.

Some people say that the reason why Google is doing this management shakeup is to better compete with Facebook, but nobody explains how. How could Larry help? Larry and Sergey were, ever since Google saw the light, the main catalysts behind any product getting out Google’s door, including the (failed) products that were specifically aimed at competing with Facebook. Things change, and, unless Sergey and Larry have a miracle potion, Facebook is here to stay, at least for the next 5 years, and there’s nothing they can do to compete with it. They have to accept that Facebook will soon overtake Google as the most visited website on the planet. The irony is that Google is one of the main sources of traffic to Facebook (if not the main source).

I personally think that Eric was the perfect man for the job and there was no need to replace him. Let’s see if Larry can do better, which is something I highly doubt.

So far, GOOG (currently trading at $608) lost $35 since the announcement but remains bullish for the long term.

Here’s an interesting video from Bloomberg on the history of Google (I guess the co-founders felt that Google is becoming evil under Schmidt):

2 Responses to Why Is Larry Page Replacing Eric Schmidt?


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