Every stereotype is a result of observation. Doesn't mean it's ok to apply them in practice. And by using terms like "old fuddy duddy", "stupid woman" or "thieving nigger" you've said in no uncertain terms that you haven't judged that person entirely as an individual, but instead seen a little bit then filled in the blanks with your own preconceived notions.
Except that we don't know this. For all we know, said employee really was, to put it in my own terms, a wool-brained idiot. Then, because he just happened to be an old chap, 'old fuddy duddy' obviously was the right derogatory term to use. That does not make these terms any less demeaning, and I would not want the people I work with to use them, but neither does it mean Google is discriminating against people because of their age, per se.
Generalizations are never true, except when they are.
Yes, old, out-of-touch engineers exist. There are women in the world who can't do math. There are black people who steal. There are alcoholic Native Americans. There are programmers with Asperger's. But lumping an individual person into those stereotypes -- especially in the workplace -- is just asking for a lawsuit.
Do you see nothing wrong with the phrase, "You're just another out-of-touch old man"? Besides just being flat-out mean, it's also so devoid of any specific meaning as to be blatantly discriminatory.
Obviously Google was a pretty successful place, and became more successful. It's hard to argue they made the wrong decision.