Last night's surprise announcement thatGoogle(GOOG-commentary-Trade Now) Co-Founder Larry Page would take the CEO post from Eric Schmidt on April 1 caught everyone off guard. A few years ago, Schmidt had talked about the "troika" of him, Page and Sergey Brin working together for the next 20 years. And the market seemed to like that because Google had been extremely successful up to that point. The thinking was, if it ain't broke, don't fix it.
The stock is up today because of Google's strong earnings last night, but I believe there could be trouble ahead for the company based on this move.
Google used to be thought of as unassailable in ads. It perfected AdWords, which revolutionized the media world over the last 10 years. However, it has had a hard time leveraging that success into other businesses.
There are some areas of real promise. Google is starting to fire on all cylinders in the display segment, where it used to trail Yahoo (YHOO) badly. This improvement is also helping Google to take advantage of the YouTube acquisition. YouTube still dominates the user-generated space and Google hopes to expand its uses to include professionally streamed content as well. Meantime, Android phones are helping ensure that Google will play a central role in the mobile world. Just yesterday, the company said it is now activating 300,000 Android devices a day.
But Google faces a huge challenge fromApple(AAPL-commentary-Trade Now) in the mobile market. Steve Jobs recently said that users interact with ads very differently on mobile devices than on computers. If true, this could greatly hurt the cash cow AdWords business.
Facebook has also made Google's attempts to build up a social networking business (remember Wave?) look silly.
Despite the Google troika's valiant efforts yesterday to make it sound like this transition is the culmination of years of planning, I don't buy it. Schmidt admitted yesterday that internal decision-making issues at Google have hindered the company's ability to respond to competitive threats in recent years.
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