LDN - Business

Google co-founders step aside as Pichai takes helm of parent Alphabet

[December 04, 2019] By Paresh Dave

SAN FRANCISCO (Reuters) - Google co-founders Larry Page and Sergey Brin are stepping aside as leaders of the Internet behemoth they founded 21 years ago, ending an extraordinary run that saw them build one of the world's most valuable and influential companies.

Trusted lieutenant Sundar Pichai, who has run the core Google search business since 2015, will immediately take the reins as CEO of parent Alphabet Inc.

"While it has been a tremendous privilege to be deeply involved in the day-to-day management of the company for so long, we believe it's time to assume the role of proud parents — offering advice and love, but not daily nagging!" Page and Brin wrote in a blog https://bit.ly/2sA9tGb post on Tuesday.

Page, Brin and Pichai have shared an emphasis on developing artificial intelligence software to make web searching faster and more personalized, while expanding the range of information and services available from a simple text query.

But their vision faces unprecedented scrutiny, with governments on five continents demanding better safeguards, an end to what many view as anticompetitive conduct, and more taxes from the world's largest online advertising company. Thousands of employees have protested, and some have even resigned, over ongoing concern that Google's famous "don't be evil" mantra - once embraced by Page and Brin - may be cracking.

Streamlining Alphabet's unorthodox management structure could help the company better respond to the challenges and focus on growing profits, investors said.

"This signals a shift away from the more fringy efforts ... and more towards a company focused on technology that makes money," said Kim Caughey Forrest, chief investment officer at Bokeh Capital Partners.

Alphabet, which owns more than a dozen companies including self-driving car business Waymo and health care software company Verily, was created in 2015 as part of a restructuring. The Google unit retained control of major businesses including video giant YouTube, the Android smartphone software and hardware operations, and cloud computing.

Page had wanted to focus on developing the newer businesses, which collectively lose money. He left Google, by far the biggest and most profitable part of Alphabet, to Pichai, who in turn delegates a lot of authority to deputies who manage the various product lines. Brin had stayed on as Alphabet's president, spending time on robotics, health ventures and other research projects.

But Page and Brin, once regular sights at public events and at Google headquarters, had become much less visible in recent years. Page's retreat into the background drew increasing criticism from employees and U.S. lawmakers, who demanded answers from him rather than Pichai about controversial projects such as an experimental search app for Chinese users.

Page and Brin, both 46, remain directors of the parent company but will cede their respective CEO and president titles immediately, Alphabet said. The president role will not be filled, it said, describing the changes as long discussed.

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Larry Page (L) and Sergey Brin, co-founders of Google, show the new G1 phone running Google's Android software in New York September 23, 2008. REUTERS/Jacob Silberberg/File Photo

Page's voice has been impaired for years because of a chronic condition, but his health did not play a role in the decision to step aside, Alphabet said.

"With Alphabet now well-established, and Google and the Other Bets operating effectively as independent companies, it's the natural time to simplify our management structure," the co-founders said. "We are deeply committed to Google and Alphabet for the long term."

The co-founders still control the company through their ownership of preferred shares. As of April, Page held 26.1% of Alphabet's total voting power, Brin 25.25% and Pichai less than 1%. Alphabet shares rose 0.56% following the after-hours announcement to $1,302.

'MOONSHOTS' AND REGULATORS

Page and Brin developed the core Google search technology while they were still graduate students at Stanford, and it quickly proved far superior to competing search engines of the early Internet era.

By the time it went public in 2004, Google dominated Web search and was on its way to becoming a household name and the most powerful force in the global advertising business. The young co-founders also nurtured a free-wheeling, engineering-driven culture that became a model in Silicon Valley, which is littered with startups launched by Google veterans.

Pichai, 47, who has spent 15 years at Google, rose to prominence while leading development of Google's Chrome browser. He later led product development and engineering across all of Google's services for a year before gaining the CEO title.

Page and Brin are active in a range of non-Google ventures. Page funded a company attempting to develop flying cars, and Brin at a conference last year discussed a budding interest in cryptocurrency. The Alphabet structure was designed in part to let them pursue new "moonshot" projects.

Investors and regulators, however, were never completely sold.

Alphabet had used the separation between Page's and Pichai's roles to defend its limited financial disclosures about YouTube and other large Google businesses when the practice was questioned by U.S. securities regulators in 2017.

It contended that publicly reported financial results were in line with what Page reviewed as Alphabet CEO. Regulators did not take further action, but the company's stance has frustrated investors trying to evaluate its performance.

Alphabet declined to comment on whether public financial reporting would change with Pichai assuming both CEO positions.

(Reporting by Paresh Dave; Additional reporting by Sinéad Carew and Caroline Valetkevitch in New York and Noel Randewich in San Francisco; Editing by Lisa Shumaker and Nick Tattersall)

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