- Google founders will still be influential at the company.
- Microsoft and Apple have enjoyed spectacular growth after founders exited.
- Google is now a young adult but founders are not completely detached.
In the farewell letter announcing their exit from executive roles at Google, Larry Page and Sergey Brin wrote that they will now “assume the role of proud parents – offering advice and love”.
If Alphabet’s stock is to surge similarly to Apple and Microsoft after the exit of a founder and a long-serving CEO respectively, that’s not good enough. A better role for the two Google founders is absentee parents! They should give the new Alphabet CEO Sundar Pichai complete freedom.
As has been proven severally, the attachment founders have to their companies can work against investors’ interests. For instance, Microsoft’s obsession with dominating all spheres of personal computing as epitomized by Bill Gates and later the company’s employee number 30 Steve Ballmer saw the firm miss out in other technology niches it could have easily won.
It also led to flawed acquisition decisions and subsequently billions of dollars down the drain. It took a fresh pair of eyes, or at least a different perspective in the person of Satya Nadella to refocus the company on its company’s strengths, admit defeat in certain areas and get rid of the deadwood.
Just what the doctor ordered for Microsoft
Some of the changes Nadella made after rising to the helm in February 2014 included reducing the software maker’s overreliance on Windows OS. He doubled down on cloud computing and killed unprofitable initiatives such as the Windows Phone. Nadella also admitted an acquisition error under Ballmer and let go of Nokia just years after the blockbuster acquisition had been made.
In the years that have followed Nadella’s appointment, the market rewarded Microsoft’s stock handsomely. At the time of Ballmer’s exit as CEO, the stock was priced at around $37. Currently, Microsoft is trading at about $150. This is a gain of around 300%.
A similar thing has happened at the company Steve Jobs and Steve Wozniak, the latter now investing in the likes of bitcoin, founded. While Apple purists would have a lot to complain about regarding the company’s current direction, a change of guard has similarly unlocked value in the tech giant’s stock.
Operations guy takes over from product genius
After taking over as CEO, some of the changes that Tim Cook has made would probably have made Jobs turn red. This has included straying away from Steve Jobs’ minimalist approach. This has been demonstrated by the broadening of the product lineup to an almost confusing mix. A case in point is an ever-increasing number of iPhones being released in a single cycle. As infuriating as it may be to Apple purists, this has increased the size of the pie that the company is able to capture.
Cook has also been more responsive of the market by for instance introducing a ‘phablet’ iPhone. At the height of his success Jobs gained notoriety for saying customers don’t know what they want and consumer businesses like Apple knew better.
When Jobs resigned as Apple CEO and announced Cook as his successor in August 2011, the stock fell to $356. As it split in 2014 on a 7-for-1 basis, this has translated to a rise of 420% based on the current price of slightly over $260.
‘Do the right thing’ Google founders and send the stock soaring
At Google, the opportunities available for Pichai to make changes and see the stock soar certainly exist.
This includes getting rid of the money-losing passion projects initiated by Page and Brin and which have little chance of becoming major businesses. During Page’s reign, they were dubbed ‘Other Bets’. Pichai should have the courage to kick some of the ludicrous ones to the curb as they are what the name suggests – gambles!
But with Page and Brin lurking around as ‘proud parents’, it will not be so easy. Google investors can only hope they do not consider themselves above Alphabet’s code of conduct and will ‘do the right thing’. Which is to disappear.