
Larry Page and Wall Street: Who needs who? - ssclafani
http://www.reuters.com/article/2011/04/17/us-google-page-idUSTRE73G1GZ20110417
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latch
This somewhat reminds me of a few articles I've read of Jim Sinegal (CEO of
Costco). There's a particular good read here:
[http://www.fastcompany.com/magazine/130/thinking-outside-
the...](http://www.fastcompany.com/magazine/130/thinking-outside-the-big-
box.html)

Choice quote:

"the people in that business [wall street] are trying to make money between
now and next Thursday. We're trying to build a company that's going to be here
50 and 60 years from now."

This makes me want to work at Google now.

~~~
tiagok
"This makes me want to work at Google now." !!

I do to think this is the way!

~~~
dasil003
Is there any way to parse this comment that makes sense? I suspect a typo but
I can't figure out what it is.

~~~
tealtan
Sounds like "I do too think this is the way!"

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rudiger
Why should Larry Page (a billionaire many times over) have to answer the
questions of some loser $100K analysts? I commend Google for not estimating
their earnings, offering "guidance", or any of the other bullshit that these
analysts need to justify their useless jobs.

~~~
meterplech
This criticism seems unnecessarily harsh and focused on income.

There are real issues here regarding the role of a CEO in working with or
talking to analysts and investors. You could make an argument that it serves
Google's long-term interest to withhold this information from analysts and
their shareholders. Or you could argue that Larry Page should answer to people
who own part of his company. I'm not saying one is more right than the other,
you just aren't contributing to the discussion by trashing someone based on
their income.

This isn't about Larry Page vs some "loser $100k analysts" it's about the CEO
of a major public tech company and their relationship with their investors.

~~~
loganfrederick
I had to upvote and add to this comment to emphasize your point. I haven't
looked through Google's SEC filings for what Larry's actual comments are, but
he does need to remember that it's not "his" company anymore and he is
partially a billionaire _because_ Google went public (in exchange for getting
public money and boosting the value of his own net worth, Google has been able
to use that public funding for its continued growth). He likely would've been
rich had Google not gone public, but it did and it'd be hard to argue against
the positive boost it has given him.

He may not owe it to public investors to give bullshit earnings guidance, but
he does owe it to them to answer their questions on how he intends on managing
the company and transitively the investor's money.

~~~
erikpukinskis
_he does owe it to them to answer their questions on how he intends on
managing the company and transitively the investor's money._

I disagree. You chose to invest in a company based on your belief that it will
grow as an asset. If you want to have guarantees of certain information beyond
what the SEC requires, you need to enter into a separate contract with the
corporation.

Page is a founder and CEO in good standing with the board. He doesn't owe
shareholders squat.

~~~
PakG1
That's all true except your very last sentence.

 _He doesn't owe shareholders squat._

That's an unnecessary hyperbolic statement that doesn't accomplish anything
good.

It's because shareholders buy in that Google's share price doesn't totally
collapse. If Page doesn't owe them squat, he's free to act irresponsibly and
stupidly. Take all of Google's cash and go spend it buying up professional
sports teams.

Fortunately, Page isn't that stupid and is working to build something big
long-term. If he pulls it off, shareholders will be rewarded. If shareholders
don't "get" his strategy right now, and Page thinks "whatever you guys, I'm
doing what I need to do", that's no reason to state that Page "owes them
squat." Page is still acting in the shareholder's long-term interest, whether
shareholders agree with his strategy or not. But let's not say he "owes them
squat."

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antoinevg
Stock price only starts to matter when a company needs access to more cash
than it can generate through sales.

Google is currently in a position where they cannot easily continue to
increase sales by spending their (enormous) cash reserves.

Letting the stock tank a little now reduces the perceptual gap between stock
valuation and actual earnings.

If that gap is not reduced stock continues to climb while sales growth remains
stagnant with the result that, even when engineering investment starts to
reflect in sales, unrealistic growth expectations becomes more and more
difficult to maintain.

I wouldn't be surprised if Larry Page becomes more communicative when/if he
can pull off a Steve Jobs and get Google's product development pipeline to the
point where the company can reliably maintain sales growth.

Right now, boosting investor confidence can only work against him in the long
run.

~~~
ntoshev
> Stock price only starts to matter when a company needs access to more cash

I used to think that too, but it's not true. Stock price matters for the
existing shareholders, including founders and employees, who may need to cash
out for personal reasons. The stock price is an instrument to align the
interests of many.

~~~
antoinevg

       The stock price is an instrument to align the interests of many.
    

I like this definition very much.

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asanwal
Page may justifiably dislike Wall Street and their short-term orientation, but
he probably does need to detail his vision for shareholders esp the long-term
type of investor.

Because if that type of shareholder loses faith in the company's direction and
Page's leadership and start voting by not buying Google's stock, that will
have deleterious impacts. Most obviously, given the talent wars in the Valley,
a dropping stock price will not help Google attract top talent vs. pre-IPO
companies where the value of options and stock is uncertain and the upside
seems and may be higher.

~~~
xiaoma
I disagree. First of all, share prices are always going to be tied to the
fundamental values of a company to some extent. No matter how much an analyst
hates a company, if it's generating 50 billion in profits each year, it's
clearly worth a market cap of at least a few hundred billion. If Page is
right, and is in the process of growing his company to that level over the
next ten years, even an analyst who _hated_ the company would be compelled to
give it triple, more likely 5-6 times its current valuation.

Furthermore, since Google is highly profitable and has no need to ask the
market for more investment, it's not beholden to short term share prices. If
the stock price were brutally and irrationally hammered, the logical reaction
would be to just spend some of their billions in cash to buy back outstanding
shares at the irrationally low price. This would concentrate the ownership of
all current share holders, thus giving them a both an immediate increase in
value per share and an indefinitely larger chunk of whatever profit is being
generated. One way or another, the either the valuation will be sufficiently
close to reality or the company will just start paying a dividend of which
none of the irrational sellers get any.

Obviously no established company can compete with the potential upside of a
small company which is offering a large stake to early employees and just
_might_ make it huge. But a one time fluctuation to share price won't matter
in the long run. Remember it's a linear adjustment and growth rates of
investments are calculated by taking a geometric mean, not an arithmetic mean.

~~~
asanwal
I think your comment on share buy backs is not steeped in reality. Moreoever,
share price is not always tied to fundamental value of a company. For value
stocks, it is. But for tech companies (growth stocks), it is often tied to
implied or expected growth. And if Page can't articulate where that growth
will come from, the stock price can get hurt.

~~~
infinite8s
Yes, but the GP's point was that Google's growth as a company is independent
of it's stock price. I almost hope that Wall Street doesn't look favourably on
Google for a while - it means that the stock will be a (relative) bargain (if
Page is able to execute on his un-articulated long-term vision).

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_sh
From the article's tone, it sounds like Wall St is miffed Larry doesn't need
it as much as it would like.

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Synthetase
I don't see how the vanity of a some analysts affects Google's underlying
business. This is exactly the bipolar behavior of the market which has netted
people like Buffett a fortune.

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varjag
It's the good old hill-climbing: to get out from local optimum to a better
condition you inevitably have to descend a bit before you get on the rise
again.

~~~
dude_abides
Can't have put it better.

Of course, the obvious caveat is that you may or may not reach a better
optimum with this approach.

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jdp23
it certainly sends a clear message to employees and other stockholders that
Larry doesn't see it as important to keep the stock price up.

~~~
staunch
...in the short term.

~~~
mrtron
I wonder what the odds are this is a planned suppression of their stock price.

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felixc
I think it's fairly telling that the analysts appeared to treat the decline in
stock price as a punitive measure, rather than offering any kind of
explanation for why Page's silence means the company is worth less than it was
last week.

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scotty79
Can someone give me a good reason why Google should care what Wall Street guys
think and how much they value casino chips that Google gave them to play with?

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jcampbell1
Does google give employees options or just restricted stock?

It is a bit demoralizing to have your company's stock tank right after annual
bonus options are priced.

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brown9-2
Stock price down 8% in a single session based on short-term emotion and
reaction?

Sounds like a good time to buy.

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spartanfan10
4 year olds on Wall Street.

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Hisoka
The message from this article seems a little flawed. Your stock price doesn't
go up because you pampered Wall Street analysts, treated them nicely, etc.
Your price goes up when you earn billions of dollars more than people
expected. It's all about the money, not what you say. Perform well, and
investors will care little whether you insulted them.

And to be honest, the fact this matters.. what does this say about Wall
Street???? It's just a game of impressing people, and not based on what really
matters - which is profit?

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mikealle233
It's really starting to look like Google has jumped the shark with making
Larry CEO.

Google has serious strategic problems going forward, and it seems the best
Larry can do is make 25% of employee bonuses tied to chasing Facebook and
ignoring investor questions.

Making a rags to riches die hard engineer CEO of a multi-billion dollar
corporation may seem like a cute idea, but this won't end well.

~~~
tomjen3
Can you justify your declarations?

~~~
mikealle233
No.

