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Google shake-up returns Page to CEO post

Surprise move could signal the Internet giant is going back to its start-up roots as challenges mount.

January 21, 2011|By Jessica Guynn, Los Angeles Times

Reporting from San Francisco — Facing new threats to its role as the world's dominant Internet company, Google Inc. announced a surprise executive shake-up that appears to put innovation and technology — not management — in the driver's seat.

Larry Page, Google's 37-year-old co-founder, will reclaim the top job from Eric Schmidt, the boardroom veteran who brought corporate discipline to the fledgling Web start-up a decade ago, helping it become the world's most popular search engine.

But even though it has matured into a powerful company with a rich stock price and enviable profits, Google is facing increasing competition from younger upstarts such as Facebook Inc., the social networking phenomenon that is vying with Google for Internet advertising revenue.

To get back its mojo, Google may be returning to its start-up roots.

"A lot of the growth of the company used to be driven by innovation," said Yun Kim, an analyst at investment firm Gleacher & Co. "Having someone with the very strong products background that Larry has could bring some innovation back to Google."

Schmidt, 55, will remain as executive chairman and will advise Page and Sergey Brin, Google's other co-founder. Brin will give up his title as co-president to work on high-priority projects.

One of those projects is believed to be social networking tools to counter the growing popularity of Facebook, which has supplanted Google as Internet's most talked-about and closely watched company.

While Google is showing great promise with its Android operating system that will power a new generation of smart phones and tablet computers, it has yet to come up with a satisfactory counterpunch to the growing competitive threat of Facebook, prompting a period of soul-searching at the company, which is facing one of its few direct challenges in the years it has ruled Internet advertising.

The surprise shake-up, which will take effect April 4, was announced Thursday after the close of regular trading on Wall Street.

Investors liked the move. Google shares jumped to $635.50 in after-hours trading, after falling $4.98 to $626.77 in the regular session.

Schmidt took over as chief executive from Page, then 28, in July 2001. Schmidt, a seasoned Silicon Valley veteran who had served as CEO of Novell and chief technology officer of Sun Microsystems, was brought in to provide some "adult supervision."

He helped the company earn a profit in 2002 and guided it a 2004 initial public offering that at the time was the biggest for an Internet company. Over the years, he won kudos for shepherding the company's fast-growing business and its headstrong founders, who remained deeply involved in the company's products and strategic direction and didn't always see eye to eye with Schmidt.

On his Twitter account on Thursday, Schmidt wrote: "Day-to-day adult supervision is no longer needed."

"I believe Larry is ready" to take over as CEO, Schmidt said during a call with analysts. "It's time for him to have a shot at running this."

In recent months, Schmidt had assumed more of an ambassador role for Google, which is under heavy scrutiny from regulators in the United States and abroad and faces growing questions about its ability to innovate and compete against Internet upstarts such as Facebook, whose CEO is its tech-savvy founder Mark Zuckerberg.

"We will see if Larry can integrate more tightly the technology with the business model," BGC Partners analyst Colin Gillis said.

Few were surprised that Schmidt desired more of a behind-the-scenes role as he had grown increasingly weary of the intense scrutiny and heavy demands of running a public company with the international profile of Google.

He had stopped participating in Google's quarterly calls to discuss earnings with analysts. And he had expressed frustration with how his comments — some say gaffes — on how Google approaches consumer privacy had been picked apart by pundits and lampooned on late-night television.

But many in Silicon Valley were stunned that Page had decided to retake the reins, having given no public hints of his personal ambitions.

"It was a big surprise," said Danny Sullivan, editor of the blog SearchEngineLand, who has tracked Google since it was founded. "I'd seen no indications that this was something he wanted."

Page, a prodigy who began playing with computers at the age of 6, has always been more reclusive than either Schmidt or Brin.

Page and Brin were Stanford graduate students in the mid-1990s when they undertook a research project to find a better way to search the Internet, creating the foundation of Google. Google's search algorithm PageRank is named after Page.

They formed the company in a Palo Alto garage in 1998, and Page ran the company for three years until it reached 200 employees. Page and Brin have always approached business differently. In a founders' letter to investors, they said: "Google is not a conventional company. We do not intend to become one."

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