Photo: Flickr / Thomas Hawk
The new stock structure gives Google’s founders more control over the company, preventing activist shareholders from coming in and influencing the business.
He says it’s going to go the way of Xerox PARC, which invented a lot of neat stuff, but couldn’t capitalise on it:
Silicon Valley’s legacy will always be Apple (AAPL), Intel (INTC), Google (GOOG) and now Facebook (FB). But there’s another part of the Silicon Valley legacy that Valley types like to sweep under the carpet: Xerox PARC.
Xerox PARC came up with a bunch of great innovations – and yet they did nothing with them. They got copied by others, but were never capitalised on by Xerox (XRX) itself. They also had a lot of spending down rat holes projects. There are many reasons for why this happened: weak leadership locally, absentee owners, little accountability, a false sense of security/overconfidence of those who worked there.
With Google – both prior to yesterday’s letter and now after – you are getting the best and worst of Silicon Valley in one. On the one hand, you are getting the preeminent search company in the world with probably the best business model in the world tied to it (pay per click). On the other hand, you are getting Xerox PARC. A lot of spending down the rat hole. A lot of flowers blooming and dying. A lot of false sense of security.
He then questions how innovative the company really is since it’s basically just building slightly better versions of what’s already out there:
Was copying Internet Explorer innovating? Or Yahoo! (YHOO) mail? Or Facebook? Or buying YouTube?
When they’ve truly tried to “innovate” it’s been in areas like driverless cars and Terminator sunglasses.
All of these projects don’t change the fact that Google has really only been able to capitalise on one thing: Its search business. Nothing else has delivered:
You think Android is it? The co-founders pointed to it as evidence of their long-term thinking because it’s taken them 6 years to get here. (And, again, was it “innovating” or did they rip off Apple, as Steve Jobs alleged?)
But where exactly is “here”? They’ve apparently only made just $544 million from Android over that time. Remember they announced yesterday they made $10 billion in Q1.
I was on a business show yesterday with a Google bull and he said “but it’s cheap and it still could make so much money from Android and YouTube in the future.” Maybe.
Bottom line: Google’s shares broke $600 in 2007, and haven’t really moved since. And now it has a new goofy stock structure which basically tells shareholders to buzz off.
There will be no outside pressure for Google focus, and the company could dive deeper into the rat hole of side projects.
Read Jackson’s full rant here, it’s worth it.