Seeking Alpha
Long only, medium-term horizon, tech, solar
Profile| Send Message|
( followers)  

Google's (GOOG) big earnings beat wasn't the news.

The news was its super-strange stock split, in which investors will get new non-voting shares so co-founders Larry Page and Sergey Brin can maintain operating control.

It's good to be the King.

There is good reason to warn shareholders of a bumpy ride ahead and to strap in the pilot's seat belt this way. The reason is Motorola Mobility (MMI).

Once MMI results are brought into the Google balance sheet, operating margins are going to take a severe hit. There are rumors the operating company might be sold to Chinese networking giant Huawei but those are just rumors. (China has yet to approve the GOOG-MMI deal so passing MMI on to a Chinese company could be good business.) The new structure would let Google either sell the company or double-down on its investment.

Page's letter to shareholders on this was filled with bromides, and the plan is certain to pass, because who doesn't like free stock in a company that's growing like gangbusters?

But what if a bus ran over Larry and his self-driving car tomorrow? What if Sergey got shot by a mugger?

What happens to Google's Murdoch-like stock structure without its Murdochs?

There is no answer to that in Page's letter. "Investors and others have always taken a big bet on us, the founders, and that bet will likely last longer as a result of these changes." How nice. How true. We saw how those idiots out-maneuvered Steve Jobs back in the day, and you're not going to do us that way. No sir.

But, Larry, if Jobs hadn't been done that way, even he admitted, he wouldn't have been Jobs. To really succeed you need to fail. Where's your fail?

The bigger question remains what happens to those voting shares when Page and Brin are no more, as Jobs is no more. Do the heirs appoint a new King? Do they keep running the company from whatever lives they choose to have? Do they come into the Googleplex and, regardless of their talents or lack of them, turn into the Google versions of Louis XVI?

Page and Brin talk about the long term, and investors often talk about the long term, but they are really talking about the medium term because, as Keynes observed, in the long run we're all dead. And it's the failure of big companies to understand that truly long term can, in the end, destroy them, and all shareholders have seen built on their behalf.

Meanwhile, of course, a toast. To Larry and Sergey, L'Chaim. And we mean it.

Source: Google Says Larry Page Won't Get Jobbed, But What Next?