But Google, or rather Alphabet (GOOGL), is a very troubled company.
CEO Sundar Pichai has been all over the media, warning about it. Perks large and small that once cosseted Google engineers are going away. Programmers are being told to “add value” or else. The word “layoff” is being used.
A lot of people aren’t listening. Here’s why they should.
At its heart, Google remains an advertising company. Its products, for the most part, remain mediocre. Google Cloud continues to lose money while it buys market share. Google is also a global business.
However bad you think things are in the United States, they’re worse everywhere else. The easiest thing for companies to do when they’re told to hunker down is cut ad budgets. This makes Google very vulnerable.
Google usually delivers profitable growth like clockwork. Last quarter it grew 13% and brought 28% of revenue to the bottom line. At scale. That’s $16 billion in profit on $70 billion in sales. In just three months. Most of it is self-service. Companies buy ads on Google search and YouTube without talking to anyone. It’s all done online, through auctions run by Google algorithms. It’s a money making machine.
But what happens when there’s not as much money to be made? The machine runs down. And there’s nothing to pick up the slack.
Pichai is telling people to take up the slack who lack the tools to do it. Google has never turned out gee-whiz hardware. The success of Android is down to its use by OEMs. The Google Pixel phone is an also-ran. Google even failed to sell its Waymo car technology to a single major carmaker, thus wasting a multi-year head start on the market.
Management is now blaming employees for problems that are entirely of its own making. Employees not happy. I don’t blame them. Heads are going to roll, just not in the C-Suite. Google is becoming “just another company,” and that’s going to take years to fix.
My guess is Google stock could be selling for under $100/share by the end of October. I would love to be wrong. But without some changes at the top, I don’t see any way out of it.