Despite increased profits, Wall Street punished Google for higher costs as Larry Page take over
Google’s share price fell by nearly six percent, despite increased profits, because its costs jumped by 54 percent last quarter, and investors expressed concerns over the company’s management changes.
The search giant increased its profits by 29 percent to $6.54bn (£3.99bn) in the first quarter of 2011, but its costs went up by 54 percent to $2.84 billion (£1.78bn) having hired nearly 2000 new staff members.
Is the new management in control?
Some analysts have commented that co-founder Larry Page (pictured), who took over the CEO role earlier this month, is less likely to keep costs under control than Eric Schmidt, who he replaced.
The big jump last quarter took place on Schmidt’s watch, but Page is apparently planning to hire another 6000 people and expand Google into new areas. However, analysts were reportedly disappointed that he didn’t explain much of this on the earnings conference call, where he left other executives to answer questions.
“My sincere hope is that over time he enunciates the strategy much more clearly,” Jim Tierney of WP Stewart, an asset management company which owns Google shares, told Reuters.
Google lost its media-frienfly front man Jonathan Rosenberg this month, as Page took over, and since then Page has reorganised his mangement team so that the top executives responsible for major divisions report directly to him.
Page will have to settle overlaps and disputes, as the Android is in danger of fragmenting as it straddles tablets and phones, while Chrome is moving from netbooks towards tablets. Meanwhile Youtube is evolving into a broadcast platform.