Google Co-Founder Larry Page To Replace Schmidt As CEO

As Google released its Q4 2010 earnings on Thursday, the company dropped a bombshell: CEO Eric Schmidt is moving upstairs, out of day-to-day operational management. Co-founder Larry Page [picture, right] will assume the CEO slot on April 4.

When Schmidt arrived at Google a decade ago, he was seen as an experienced tech executive who could handle the demands of running a large, growing company founded by two young computer scientists. On Thursday, Schmidt referenced that perception in a Twitter message -- "Day-to-day adult supervision no longer needed!"

Schmidt will continue to work for Google, assuming the role of Executive Chairman. "By elevating me and having Larry running things day to day, we think this will produce even better results for the corporation," Schmidt said on Thursday's earnings call.

In a blog post, Schmidt said the management change arose out of a discussion about simplifying Google's management structure and streamlining its decision making process.

The management shift seems not to have phased investors. Google's stock, down almost five points (about -0.8%) on Thursday during regular trading, was up about fifteen points (about +2.4%) in the after-hours trading immediately following the earnings release and leadership announcement.

That may have more to do with the company's robust financial performance than with anticipation of how Page will fare as CEO. Google reported revenues of $8.44 billion during the last quarter of 2010, up 26% compared to the fourth quarter of 2009. Net income (GAAP) for the quarter was $2.54 billion, compared to $1.97 billion in the comparable year-earlier period. CFO Patrick Pichette called the news a "phenomenal ending to a very good year at Google."

However, Google's earnings may come under pressure in the future. Pichette noted that Google had raised all base salaries 10% across the board and that the company had shifted compensation for non-executives from bonuses to salary increases, in order to provide employees with more stable income. He also said the company planned to continue to hire engineers and product managers.

Google has had increase to its salaries to retain its engineering talent. A significant number of Google engineers have taken jobs at Facebook, lured by the prospect of shares in the company and an IPO. Others have left to join startups or other competitors, frustrated that career advancement happens at a slower pace in more mature companies.

Sergey's Role

Sergey Brin, who co-founded Google with Page, will retain the title of co-founder and will focus on strategic products. "I would like to work more on my personal passions, including several new significant products that I hope to tell you about in the future," he said.

Schmidt's transition comes at a good time for Schmidt in that the company's performance under his tenure has been exemplary. He is stepping aside just as Google spins the wheel on its riskiest bet yet: the launch of Chrome OS, the company's Web-based operating system. The company is also facing an antitrust inquiry in Europe and resistance to its interpretation of net neutrality and to data gathering.

Schmidt's insistence that Page is ready to run Google, repeated in his blog post and on the investor conference call, appears to be a sober translation of his jest on Twitter that adult supervision is no longer necessary. Page, at 37, is no Mark Zuckerberg; he's old enough to be President of the United States and is thus presumably old enough to run a major global company.

But age isn't necessarily the issue. The issue is that company founders aren't necessarily the best corporate leaders.

If Google is lucky, Page will turn out to be the next Bill Gates or Steve Jobs. But he could also turn out to be the next Jerry Yang, whose tenure as the CEO of Yahoo was underwhelming.

For Further Reading

Analysis: Google Dropping H.264 Support In Chrome Is Shortsighted

Google Docs Preparing For Life As A Platform

Google Promises No Planned Downtime.