Image: Larry Page, Eric Schmidt
Reuters
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.
By
updated 1/20/2011 8:04:45 PM ET 2011-01-21T01:04:45

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.

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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.

Life Inc.: Google among best companies to work for

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.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Timeline: Google expansion

Explainer: Top CEOs and their exit strategies

  • Image: Howard Schultz
    Reuters file

    The news that Apple Chief Executive Steve Jobs is taking a leave of absence shook up investors and customers in large part because for many Apple loyalists, Steve Jobs is Apple Inc.

    Jobs isn’t the only CEO to be so closely associated with a brand that investors and customers fear the company will be nothing without them. Here’s a look at companies that have successfully prepared for the loss of a CEO, and those that haven’t.

  • Google/Eric Schmidt

    Image: Eric Schmidt
    AP

    “Day-to-day adult supervision no longer needed!” Eric Schmidt tweeted. It was his way of announcing that he was stepping down as chief executive of the search engine giant, and also showing that he was in on the joke about his role at the company.

    Schmidt, a longtime technology executive, was brought on board a decade earlier to help the company’s founders, Larry Page and Sergey Brin, grow their fledgling but very promising young company.

    Schmidt now clearly thinks the company doesn’t need that guidance anymore. In April, Page will take over as chief executive and Brin will focus on new products.

    “Larry, in my opinion, is ready to lead,” he said in a statement the company released Thursday.

  • Berkshire Hathaway/Warren Buffett

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    The Oracle of Omaha, Warren Buffett, said in a 2007 letter to shareholders that he has long had three internal candidates to succeed him as chief executive of Berkshire Hathaway, and had identified four potential candidates for the investment side of his job.

    Last year, the company announced that it had hired Todd Anthony Combs, a young former hedge fund manager who may turn out to be the heir apparent on the investment side of the business. Buffett said in February of 2011 that four candidates are in the running to be CEO.

    Buffett, now 80, announced details of his succession plan in his typical folksy style, writing in the 2007 letter to shareholders: “I’ve reluctantly discarded the notion of my continuing to manage the portfolio after my death — abandoning my hope to give new meaning to the term ‘thinking outside the box.’”

  • Microsoft/Bill Gates

    Image: Bill Gates
    Reuters

    Bill Gates co-founded Microsoft Corp. in 1975 with his childhood friend Paul Allen. But it was the man who lived down the hall from Gates at Harvard, Steve Ballmer, who would be groomed to lead the company.

    Ballmer joined Microsoft in 1980 and took over as Chief Executive in 2000, amid a long-running antitrust investigation that at one point threatened to break up the company.

    Gates, who became Chief Software Architect in the change, gave investors plenty of warning of his next move. He announced in 2006 that he would be giving up his position in 2008 to focus most of his energy on his philanthropic work. Gates remains chairman of Microsoft’s board.

    Ballmer’s succession strategy is much less clear. Three senior executives, Bob Muglia, Robbie Bach and Ray Ozzie, have said they would leave the company in the past year.

    (Msnbc.com is a joint venture of  Microsoft and NBC Universal.)

  • GE/Jack Welch

    Image: Jack Welch
    Getty Images

    Jack Welch is perhaps best known for his management skills, so it should come as no surprise that Welch was grooming several potential successors before leaving his post as head of GE in 2001. Jeff Immelt was eventually handed the top job.

    Two other oft-mentioned contenders were Robert Nardelli, who had less glorious stints at Home Depot and Chrysler, and James McNerney, current chief executive of Boeing.

  • Starbucks/Howard Schultz

    Image: Starbucks CEO Howard Schultz holds up a new Via coffee product at the Starbucks corporate headquarters in Seattle, Washington
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    Although Starbucks wasn’t founded by Schultz, it was Schultz who made the company — and arguably the latte — into what it is today.

    Schultz stepped down from as CEO in 2000 to become chief global strategist, only to return in 2008 after conceding that the company had lost its footing.

    Under his resumed leadership, Starbucks made major changes meant to bring back the original feel of the company. But he also was forced to lay off employees and close stores in response to the recession. Starbucks has recently moved to expand its brand with products such as Via instant coffee.

    Schultz recently told The Harvard Business Review that he didn’t think he handled succession planning well last time and is aware of his duty to do it right next time. Still, he said he has no plans to leave soon.

  • Boeing/Harry Stonecipher

    Image: Harry C. Stonecipher
    AFP/Getty Images

    When Harry Stonecipher was forced to abruptly resign in 2005 following an affair with a staffer, Boeing was left without a CEO for several months. The company eventually chose board member and 3M CEO Jim McNerney, who had earlier said he wasn’t interested in the job.

    Alan Mulally, head of commercial airplanes and considered a top contender for the position, later bolted to Ford, where as CEO he has orchestrated an historic turnaround.

    Stonecipher’s abrupt exit followed the resignation in 2003 of previous CEO, Phil Condit, over an ethics scandal.

  • BP/Tony Hayward

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    As CEO of BP, it seemed Tony Hayward could do no wrong … until the Gulf oil spill. After a series of embarrassing blunders, Hayward was shown the door. He was replaced by Robert Dudley, a longtime Amoco executive who stood out for handling the oil spill with more tact than the gaffe-prone Hayward.

    Hayward had been given the top job in 2007 following safety issues that plagued the company under the leadership of the previous BP CEO, Lord John Browne.

  • Dell/Michael Dell

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    Michael Dell founded the company that bears his name in 1984, and handed the top job over to Kevin B. Rollins two decades later. In 2007, Dell replaced Rollins to resume the top job once again.

    Dell told investors at a conference last year that the company’s board should know what the succession plan is. But at age 45, he said he has every intention of running the company for years to come.

    That’s a far more serious answer than he gave in 2008, when he told journalists that his succession plan involved avoiding getting hit by a truck.

  • HP/Mark Hurd

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    When Hewlett-Packard abruptly dropped Chief Executive Mark Hurd in August 2010 after a sexual-harassment probe revealed that he had violated company standards, it left the tech giant without a leader.

    Chief Financial Officer Cathie Lesjak was appointed temporary CEO. In November, former SAP CEO Leo Apotheker took over as president and chief executive.

    Hurd was seen as key to turning HP around after taking over for Carly Fiorina in 2005. He also survived a 2006 scandal in which the company’s then-board chair was accused of using extreme tactics to track down media leaks.

  • Oracle/Larry Ellison

    Image: Larry Ellison
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    After being ousted from HP, Mark Hurd landed as co-president at Oracle. That company is also closely associated with its CEO, Larry Ellison.

    The move prompted some to wonder if Hurd is being considered as a potential successor to Ellison, who has run the company since founding it in 1977.

Video: Google co-founder to take over as CEO

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