Google's Page brings change and questions

SAN FRANCISCO/NEW YORK Fri Jan 21, 2011 8:41pm EST

An employee answers phone calls at the Google office in Zurich, August 18, 2009. REUTERS/Christian Hartmann

An employee answers phone calls at the Google office in Zurich, August 18, 2009.

Credit: Reuters/Christian Hartmann

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SAN FRANCISCO/NEW YORK (Reuters) - One day after Google's surprise announcement that Larry Page would once again run the company, investors and industry insiders were wondering if he is up to a now very different job.

The 38-year-old co-founder of the world's No. 1 Internet search company will replace Eric Schmidt as chief executive officer in April, at a time when Google Inc is facing tough competition from Facebook and Twitter.

It seems straight out of a well-worn Silicon Valley script -- but with which ending?

"Founder becoming CEO ... Is this like a Steve Jobs returning or a Jerry Yang returning?" Chris Dixon, a technology veteran who has invested in Skype and Foursquare, mused on Twitter, alluding to the two extremes of the tech industry storyline.

Steve Jobs returned to Apple Inc in the 1990s to save the company he founded from near insolvency. Since his return, Apple has set the agenda in technology and culture with the iPhone and iPad.

Yahoo Inc's Jerry Yang made a similar comeback, returning to his Internet company during a troubled stretch, but failed to restore its fortunes.

For Google, which dominates the search market and generated roughly $29 billion in revenue last year, the need for a change lacks the urgency that accompanied Jobs' return to Apple.

But analysts say the popularity of social networking services like Facebook, Twitter, as well as online coupon service Groupon, pose a growing threat to Google's business.

Google, whose stock underperformed the market in 2010, has struggled to develop its own social networking products and has seen many of its engineers and executives decamp to Facebook.

Meanwhile, new, smaller competitors in the Web search market are pecking away at its reputation. They say Google search result qualities, a hallmark of the search giant, has been deteriorate.

The attacks prompted Google, in a post on its official blog on Friday, to defend its record and promise to improve quality.

Page, who co-founded Google with Sergey Brin 13 years ago, will try to steer the company back to the forefront of Web innovation but must also run day-to-day operations of a 24,000-person organization -- a far cry from his last time at the helm.

"My fear would be you don't have a guy like Eric who keeps the trains running on time," said one former Google employee, who declined to be named for fear of reprisal.

"I'm having a hard time imagining (Larry) going from the role I've seen him in, to going to a CEO role," he added. "He can't come in and lay on the couch as he used to do and sort of interject here and there. Someone's got to lead the meetings."

Google hopes the management change will speed up decision-making. Page will take charge of the company's day-to-day operations, while Schmidt will focus on deals and government outreach, among other things, as executive chairman.

The track record for entrepreneurs becoming CEOs is not so good, said Michael Cusumano, a professor at the MIT Sloan School of Management, citing Michael Dell's return to the PC maker as another less-than-spectacular example of a founder jumping into the driver's seat.

"Managing an existing large business requires a different mindset and different set of skills, so a lot of entrepreneurs get quite bored and don't pay attention to details. And then things start slipping away," he said.

The key to Page's success as CEO, he said, will be to delegate a lot of the operational chores to a strong lieutenant while focusing on how to transform Google into a company that can adapt to the evolving Internet landscape.

"If Larry Page can do something different, get away from search, get away from email, try to explore some of these new platforms and bring in people to help him do that, then maybe Google can break this current reliance on Internet advertising and become a growth company again," said Cusumano.

Google shares -- which gained 2 percent following Thursday's better-than-expected quarterly results and the announcement of the CEO change -- finished Friday's regular trading session 2.4 percent down at $611.83.

Shares of Mountain View, California-based Google have risen 16 percent since Google reported third-quarter results in mid-October and are up almost 45 percent from their 52-week low of $433.63 touched in July 2010.

(Reporting by Paul Thomasch in New York, Alexei Oreskovic in San Francisco and Sayantani Ghosh and Mary Meyase in Bangalore; editing by Joyjeet Das, Phil Berlowitz and Andre Grenon)

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