December 22, 2017 / 3:00 AM / in 2 months

Breakingviews - Alphabet’s Eric Schmidt sails off before the storm

NEW YORK (Reuters Breakingviews) - Eric Schmidt is sailing off before a storm. The Alphabet executive chairman is leaving his post as the $740 billion parent of search and advertising giant Google heads towards a showdown with European regulators. Hiring a strong, independent chairwoman would reflect well on co-founders and controlling shareholders Larry Page and Sergey Brin in more ways than one. 

Schmidt is the former Sun Microsystems executive who joined Google in 2001 before it became a household verb for searching on the web. Page and Brin were greenhorns who wisely realized they needed an adult in the room to steer the firm toward public life. While Schmidt was their man, Page and Brin managed to keep an iron grip on Alphabet with super-voting shares, setting a new standard for Silicon Valley’s 21st century upstarts.

Alphabet today dominates search, digital advertising, and mobile through its Android operating system, to such an extent it has drawn the ire of the European Commission. Under Margrethe Vestager, the competition commissioner, watchdogs slapped Alphabet with a $2.8 billion fine in the summer for favoring its own shopping price comparison service over rivals.

More can be expected, especially as new rules concerning privacy come into effect next year that will hamstring Google, Facebook and others from using consumer data without consent. Similarly, Brussels is trying to determine whether Android is giving Google another portal to unfairly push its own businesses, squelching potential rivals.

Schmidt, who will continue to serve as an adviser, said he plans to spend more time on science and technology issues and philanthropy. Upcoming regulatory challenges, the elevation of Sundar Pichai as Google’s CEO - squeezing four into a triumvirate – could have been a factor. Still, the timing of the announcement in the early evening a few days before Christmas raised eyebrows.

Either way, Page and Brin now have an opportunity. There are few females in U.S. corporate leadership positions, especially at technology companies. Pichai sent out an awkward memo about gender stereotypes earlier this year. Nominating a woman to replace Schmidt would allow the Google founders to provide Silicon Valley with a new blueprint – and a formidable counterparty to Vestager.

Breakingviews

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