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Google CEO shake-up: Page in, Schmidt out

Google Inc. co-founder Larry Page is taking over as CEO in an unexpected shake-up that upstaged the Internet search leader's fourth-quarter earnings.
Image: Larry Page, Eric Schmidt
Though he co-founded the business, Larry Page, left, 37, helped bring in Eric Schmidt a decade ago to be CEO because shareholders wanted a more mature executive to run the company.Reuters
/ Source: The Associated Press

Eric Schmidt, a technology veteran brought in as Google Inc.'s "adult supervision" a decade ago, is relinquishing the CEO job to Larry Page, one of the prodigies who co-founded the company behind the Internet's dominant gateway.

The surprise shake-up announced Thursday appears to be driven by Schmidt's desire to tackle other challenges as much as Page's personal ambition.

"Day-to-day adult supervision no longer needed!" Schmidt wrote on his Twitter account moments after Google dropped the bombshell that upstaged its fourth-quarter earnings. Schmidt, 55, will still be available to advise Page, 37, and Google's other 37-year-old founder, Sergey Brin, as the company's executive chairman.

Under the new pecking order effective April 4, Page will reclaim the CEO job that he held for three years before Google's investors insisted that a more mature leader be brought aboard.

That led to the 2001 hiring of Schmidt, a professorial engineer who had previously held top executive jobs at Sun Microsystems Inc. and Novell Inc. After initially resisting Google's overtures, Schmidt bonded with Page and Brin to form a brain trust that proceeded to build the Internet's most powerful company.

Google now boasts a market value of more than $200 billion, a success story that has minted Page, Brin and Schmidt among the world's wealthiest people. The three men are Google's largest individual shareholders, stakes that turned them all into multibillionaires.

The management reshuffling appears to be amicable. Both Page and Schmidt had high praise for each other during a Thursday conference call with analysts, with Schmidt describing Google's co-founders as his "best friends."

"I believe Larry is ready" to be CEO, Schmidt said during the call. "It's time for him to have a shot at running this."

Page hailed Schmidt as a "tremendous leaders" whose contributions exceeded all expectations. "There is really no one else in the universe that could have accomplished what Eric has done," Page said.

Schmidt may have been growing weary of all the attention and prosaic duties that come with running one of world's most scrutinized companies.

For the first time last year, he started to sit out Google's quarterly calls to discuss its earnings. More recently, he has expressed irritation about how some of his public remarks have been picked apart to support the idea that Google is an arrogant company that can't be trusted to protect people's privacy as its search engine and other services collect vast amounts of personal information.

In October, Schmidt drew fire for responding to a hypothetical question posed at a forum in Washington, D.C., about an implant that would let Google know what its users were thinking. He responded that Google's policy is to "get right up to the creepy line and not cross it," and an implant would cross the line. He also said that as users voluntarily share information online, it doesn't need users to type in search queries for the company to tailor the results. "We don't need you to type at all. We know where you are. We know where you've been. We can more or less now what you're thinking about," he said.

Such comments have been repeated in online musings that portrayed Schmidt and Google as "creepy" image.

"The biggest thing I wonder is after a year or so of having various gaffes and statements taken out of context if he decided he no longer wanted to play that front-man role," said Danny Sullivan, the editor-in-chief of the SearchEngineLand news site.

In his new role, Schmidt indicated he will focus on meeting with Google's business partners and government regulators who have been taking a harder look at whether Google has been abusing its dominance in Internet search to thwart competition.

Brin intend to concentrate on a few high-priority products. Although Brin wouldn't discuss what he is working on, one of his pet projects is believed to be the development of social media tools to counter a looming threat posed by Facebook's increasing popularity. Facebook is selling more Internet ads and collecting an immense amount of information about its nearly 600 million users within the confines of a social network that Google hasn't been able to crack.

Facebook still has a long way to go to catch Google, as demonstrated by the way Google cranked up its Internet marketing machine during the holiday shopping season.

Google earned $2.5 billion, or $7.81 per share, during the final three months of 2010. That's a 29 percent increase from net income of $2 billion, or $6.13 per share, in the prior year.

Excluding stock-compensation expenses, Google says it earned $8.75 per share. That figure topped the average analyst estimate of $8.06 per share, according to FactSet.

Revenue climbed 26 percent from the prior year to $8.44 billion, from $6.67 billion.

After subtracting the commissions paid to Google's advertising partners, the company's revenue totaled $6.37 billion — about $300 million more than analysts anticipated.

Google shares rose $12.23, or nearly 2 percent, to $639 in extended trading after Thursday's announcements. In the regular session earlier, the stock fell $4.98, or 0.8 percent, to close at $626.77.