Google

New Alphabet Boss To Scrutinize High-Tech Ventures?

It’s not uncommon for new management at a company, upon taking the corner office, to take a look at what he or she has been left.

And in doing so, that new chief executive can opt to push to keep some things, to jettison others, to make a mark on the company from the get-go.

So may be the case with Alphabet, parent company of Google. The ascension of Sundar Pichai to the top role, as Founders Sergey Brin and Larry Page step down, may prompt a bit of scrutiny of what works, what works less well and, frankly, what might go by the wayside.

As reported by Reuters, investors hope this examination will come to pass – in the form of a “hard look” at the newer, high-tech ventures that see top-line traction, but burn through cash. Pichai, of course, has an intimate knowledge of the company, having been in charge of the Google search business for the past four years.

And the businesses that may be under the microscope are the ones that are perhaps farthest from the core search, ads and applications endeavors. Those would include the self-driving cars, the drone business and the various “smart” technologies.

These efforts are grouped inside the unit known as “Other Bets,” which had an operating loss of $3.4 billion through the past year. That comes as a drag against the $36.5 billion operating income reported by Google. Since the new operating structure took shape in 2015, the “bets segment” has lost a cumulative $10 billion. As noted by consensus estimates and as relayed by TheStreet.com, analysts expect the unit to lose $3.6 billion this year on revenues of about $660 million.

For now, investments in the unit (and further cash burn) seem to be in the offing. In the last quarterly report, Ruth Porat, CFO of the firm, told analysts that “we continue to invest meaningfully and thoughtfully for the long-term opportunities that we see.” That includes the Waymo driverless initiatives through, for example, early rider programs in metro Phoenix and long-haul trucking in Arizona.

One hindrance to a wholesale sea change in corporate strategy would be the fact that Brin and Page, together, have more than half the voting rights – meaning they’d have to sign off on such moves.

But then again, the regulatory (antitrust and other) challenges facing the company may provoke a hard look at what Alphabet is and should be. Soul searching begets strategy – and changes may come sooner rather than later.

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