As Google's Bloom Fades, Will CEO Eric Schmidt Step Down?

UPDATE: Google shares rallying Tuesday after recent declines. New data shows Google’s dominance in search grew further in October. Reports AP: “Google held a 63.1 percent share of the U.S. search market through October, up from 58.5 percent in the previous year, according to comScore. Yahoo ranked a distant second at 20.5 percent, down from 22.9 percent a year ago, while Microsoft's share stood at 8.5 percent versus 9.7 percent in October 2007. Nielsen Online pegged Google's October search share at 61.2 percent followed by Yahoo at 16.9 percent and Microsoft at 11.4 percent.”

Also, the Wall Street Journal reports that Google plans to significantly reduce the number of contract workers it uses, but has no plans to lay off employees.

Original post:

From Silicon Alley Insider, Nov. 25, 2008:

While Google's market capitalization tanks and the company launches its first wave of cost-cutting, CEO Eric Schmidt is devoting much of his public-speaking time to pressing for green-energy stimulus plans and discussing the auto industry bailout. Technology, Media & Telecom Analyst speculates that this is because he is getting ready to take a position in the Obama Administration.

We have no inside knowledge here.

We would, however, note that, having grown Google to $20 billion in revenue over seven years, Eric has certainly earned the right to take a break. We would also note that there are many other reasons why this might be a good time to exit stage left (although a year ago, when the stock was at $700, would have been a much better time). To wit: 

• He might be getting bored.
• He might be deciding that taking Google from $20 billion to $50 billion will be a much different job (and less fun) than taking it from $0 to $20 billion.
• He might be observing that the search product cycle is ending and Google has not yet found another product to drive the next wave of growth, which also might be less fun (especially if the company has to start firing people).
• Like Sergey and Larry, he might just be interested in doing something else — such as going into politics or solving the world's energy crisis.

Last year about this time, Larry Page held a conference call in which he announced that Google planned to launch a massive green energy initiative. As Larry described his thinking, it became clear that he wasn't just talking about putting solar panels on the roof — he actually wanted Google to solve the world's energy problems. When asked if this might be a bit far afield for a company in the Internet advertising business, Larry responded that if big companies wanted to get bigger they had to tackle big challenges.

For us, that was a wildly waving yellow flag: Life at Google had apparently been so easy for so long that the folks at the top had stopped thinking about how to kill their competitors and started thinking about how to solve the world's energy problems. Anytime that happens, the good times are likely coming to an end.

In the past 12 months, especially in the last 3 months, Google has been forced to refocus on the task at hand. This is unquestionably good for the company. But it may not be good for Eric, Larry, and Sergey.

Once you have mentally moved on to new challenges, it is hard to regain the tenacity and passion that got you in a position to move on in the first place. And solving the world's energy problems, though not a smart goal for an Internet search company, is certainly an admirable and worthy goal for anyone else. And folks as smart, talented, and wealthy as Eric, Larry, and Sergey are in a position to really make a difference.

All of which is to say: We would not be surprised to see Eric (or, for that matter, Larry or Sergey) step down from an operating role at Google next year to pursue other interests.

See Also:
Google (GOOG) Finally Gets a "SELL" Rating!
Google To "Significantly Reduce" Contractors -- Still