Breakingviews - Google CEO move is solution in search of a problem

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SAN FRANCISCO (Reuters Breakingviews) - The reshuffle of chief executives at Google and parent Alphabet is something of a solution in search of a problem. Sundar Pichai, who runs the search engine, will now also lead the $890 billion Alphabet, replacing Larry Page. Sergey Brin, Page’s fellow co-founder, will step back too, according to Tuesday’s announcement. But an overriding reason for the change is elusive.

Establishing Alphabet as a holding company in 2015 was a head-scratcher anyway. The idea was to have various units, from Google to self-driving division Waymo, operate independently. Page became CEO of the parent firm while Brin became president, and Pichai was put in charge at Google.

Part of the rationale was to allow Alphabet’s so-called “other bets” to flourish. But they were really the co-founders’ pet projects, and their revenue was and remains a fraction of Google’s advertising machine, which includes YouTube. In the third quarter, non-Google sales amounted to just 0.3% of Alphabet’s total of $40.5 billion.

Perhaps the partial reversal is a recognition that the other bets haven’t yet taken off – and the fact that Brin and Page were already taking a back seat, although they retain a lot of influence through their supervoting shares. Their willingness to cede to Pichai, just like their acceptance of Eric Schmidt as adult supervision earlier in their company’s life, is sensible, too.

Alphabet said the move simplifies the management structure. It certainly reflects reality: Pichai is already the most high-profile public face of the company, a role that will become increasingly important amidst regulatory scrutiny in Washington and Brussels. He testified before Congress a year ago.

The shift will probably spare the two co-founders any demands to show up themselves in the future. It also frees them to focus more on other projects both within and outside Alphabet. For example, Page backs space-mining firm Planetary Resources.

As for Pichai, he gets a promotion and will now explicitly run the world’s third-most valuable public company. There’s a lot to be said for succession steps that elicit little more than a shrug from investors.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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