Alphabet’s pilot project under Pichai or face more scrutiny

BEIJING, Dec. 5 (Reuters) – Alphabet’s leadership change has led some investors to hope that the company’s new owners will reconsider the money-burning projects the company’s founder sat down with. Larry Page and Sergey Brin, Google’s two co-founders who founded the internet giant 21 years ago, announced Tuesday that they would step down from their management positions.

Alphabet's pilot project under Pichai or face more scrutiny

After leaving, the two handed alphabet’s CEO over to sundar Pichai, who has been running Google’s core business since 2015.

Alphabet’s share price rose 2 percent on Wednesday, and some investors said Mr. Pichai’s pragmatic style and his background in running Google’s core business could make him less likely to be cold on money-burning projects that Mr. Page and Mr. Brin have enjoyed in recent years. One of the biggest changes to Mr. Pichai’s role as Alphabet’s CEO is that he will be responsible for the so-called “moonshot” projects that were designed to enrich Alphabet’s business.

Alphabet has spent billions of dollars on projects that have not yet fully gained the trust of Wall Street investors, including autonomous driving, hot air balloons that provide Internet access, delivery drones and smart contact lenses.

“The question is, will they continue to invest in these projects?” said Daniel Morgan, portfolio manager at the Synovus Trust Company. Under the new CEO, will they take a closer look at these projects and focus on the businesses that can generate growth? Synovus Trust Company holds more than $100 million in Google shares.

Alphabet’s Other Bets division posted an operating loss of $3.4 billion last year, compared with $36.5 billion in operating profit smiles over the same period. The challenge for Pichai is how to balance the potential strength of these businesses with short-term costs.

Over the past two years, the company has cut back on its investment spending on Other Bets, and Alphabet has invested more in Google’s cloud computing and consumer hardware businesses. After Mr. Pichai takes office, he may continue to do so.

Page and Brin, both 46, will continue to serve as advisers to Alphabet and control the company through their stake. As of April, Page had 26 percent of Alphabet’s vote, Mr Brin’s 25 percent and Mr Pichai’s with less than 1 percent.

King Lip, chief investment strategist at Baker Avenue Asset Management, said he expected Alphabet to make more decisions under Mr Pichai. “He’s going to be able to manage the company more effectively because he doesn’t have to worry about offending Page and Brin,” Lip said. “

Since Mr Pichai became Google’s CEO, the company’s share price has risen by 70 per cent, and Google’s market capitalisation is nearly 99 per cent of Alphabet’s total value.

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