Monday, January 24, 2011

Will Larry Page Ruin Google?

originally published by Beacon Equity Research

Google (Nasdaq:GOOG) is clearly one of the greatest success stories of all time. This once tiny, private company focused on the then esoteric subject of internet search has morphed into one of the most valuable and pivotal firms of our era. Entrenched in the public's collective unconsciousness, the very name of the company has become a popular verb indicating a worth far greater than even its billions of market valuation. With recent blow out positive earnings and growth, it appeared that nothing could stop this modern day juggernaut and its well chosen management team. However, this it appears that the positive sentiment may be changing due to a shakeup in management.

The current CEO Eric Schmidt is being replaced by one of the company's co founders, Larry Page. Schmidt is moving into an executive chairman role, which seems more symbolic than actual hands on. In fact, The New Yorker reported that he plans on exiting Google(Nasdaq:GOOG) completely after a year. It's important to remember that Schmidt is responsible for growing Google into the behemoth it is today. Although Larry Page and Sergey Brin created the company, it was Schmidt who ran the day to day operations during the massive growth. Even worse news hit the wire when it was announced that he plans on selling $335 million in shares this year, his first sale in 3 years. Does this indicate that the top is in place for the iconic search engine? Schmidt has indicated a desire to go into a career in television. I say good for him, but what's going to happen to Google?

There is much trepidation on the Street regarding Larry Page being capable of his new Google role starting April 4th. The stock market has already indicated its displeasure with the change. Shares have reversed their entire earning announcement driven gains. They are currently trading down by nearly one percent on the second trading day of the week after the announcement. The next technical support level exists at $598.67 on the 50 day moving average. The question is, will Larry Page be able to restore confidence in the brand or is this the start of a downward slide for Google?

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