Sundar Pichai will take over a mammoth American tech icon, Google parent Alphabet, rife with issues, ranging from government scrutiny to employee unrest.
Pichai — currently Google’s CEO — was named the new CEO of Alphabet Inc. after the company announced Tuesday that current CEO Larry Page and co-founder Sergey Brin will leave their posts, immediately.
The market responded favorably in pre-open trading. Alphabet shares jumped from $1,289.92 at close Tuesday to $1,295.28 before Wednesday’s open, and was up nearly 2% to $1,320.17 by 11:20 a.m. EST.
Pichai comes in amid issues with employees ranging from the company banning political discussions to responding to employees protesting potential government contracts — of which the company subsequently pulled out of.
Alphabet Will Grow Like Google Under Pichai
If his stewardship of Google is any indications of what the market has in store for Alphabet, the outlook is good.
Since 2015, when Pichai took over as CEO of Google, the stock price has climbed exponentially.
The stock started at around $541 per share in January 2015. It closed at $1,308.19 on Dec. 2, 2019 — a 41% jump in the price.
Google has 5-year earnings growth of 160.9% along with 5-year revenue growth of 128.7%. Google has a forward price-to-earnings ratio of 28.32.
The stock is currently trading 25.66% above its year-to-date moving average and 17.17% over its 200-day moving average.
That has all been done under Pichai’s leadership.
It all translates into him being able to continue Alphabet and Google’s share price growth — which is great news to shareholders and investors.
Culture Change Coming to Alphabet
Despite the issues, there is one big change to expect with Pichai — culture.
For all their acumen in development, Page and Brin were not necessarily the right managers for Google or Alphabet … something they freely admitted in a Google blog post as part of the company’s announcement.
“We’ve never been ones to hold on to management roles when we think there’s a better way to run the company. And Alphabet and Google no longer need two CEOs and a President,” the duo wrote in their post.
The simplified management structure should be a welcome change to employees who have battled the company over its handling of sexual harassment claims and deals with the federal government.
“He’s a technologist, but he’s been a steady hand for the last few years and has proven his ability to conduct business at the highest level,” Endpoint Technologies Associates analyst Roger Kay told Techxplore.com.
Pichai Will Help Alphabet Through Political Turbulence
His engineering background and analytical thinking should help Pinchai navigate the rough waters of President Donald Trump and his allegations of Google’s “liberal bias” in its search results.
That navigation already started as Pinchai met with Trump in March to discuss the president’s concerns over U.S. security. Following the meeting, Trump tweeted favorably.
— Donald J. Trump (@realDonaldTrump) March 27, 2019
But that all changed in August when Trump attacked Pinchai over comments a former Google engineer made on “Fox & Friends” about how Google plans to “use all the power and all the resources that they have to control the flow of information to the public and make sure that Trump loses in 2020.”
Google denied the statement, but Trump said Google is being watched “very closely.”
Pichai has even shown tact in dealing with the sometimes vicious claws of Congress. In testimony last December, Pichai kept cool while going back and forth with lawmakers over political bias and data collection.
“We build our products in a neutral way,” Pichai said in one exchange with a lawmaker, according to Techxplore.com, and added later, “We approach our work without any political bias.”
While Page and Brin have shied away from the spotlight, Pichai will be thrust into it. Investors and shareholders should hope Page and Brin truly step away from the company as they said they would and let Pichai steer the ship.
The culture at Google and Alphabet has taken a pretty big hit over the last year.
With Pichai in charge under a simplified management structure and his experience growing Google, the culture should change — and change for the best.