The News Headlines

Last night, long after the East Coast folks had gone home, Google (GOOG) quietly announced that former SVP of Product Management Jonathan Rosenberg was leaving the company. The move of course was presented – as it always is in the world of Dilbert Corporate America – as preordained decades ago and not out of the ordinary.
From the Mercury News, Rosenberg said:

I think I’ve done the things that I set out to do. My focus has been on building a great team, and hiring the best people in the world. I think I’ve also been very focused in studying the manner in which we manage at Google, and working very hard on developing the next set of Google management talent. We’re obviously going through a transition here; Larry is stepping into the role of CEO. And I think it was important to him that he establish and build around an executive team that intended to be here for many, many years.

However, New Yorker author Ken Auletta, who has written extensively on Google and who I believe has an accurate read on the true state of affairs at the company reacted to the move this way:

Jonathan has sway over much of the management systems at Google. Did he come to exemplify the bureaucracy Larry Page condemns? I don’t know, but I suspect the answer is yes.

I agree with him. As a critic of Google recently and someone who’s been openly skeptical of Larry Page’s leadership ability to right the ship, I think it was a smart move for Page to send Rosenberg packing.
Last January, after Page announced he would take over for Eric Schmidt, I pointed out that part of the problem at Google was some unimpressive senior executives and I specifically called out Rosenberg and Chief Business Officer Nikesh Arora.
For some reason, Google has always had both Rosenberg and Arora on the quarterly earnings calls with the CEO Patrick Pichette and sometimes Schmidt and one or both of the co-founders.
Listening to earnings calls – especially executives’ answers to questions from analysts – is one of the lost arts in stock selection in my view. At this moment when they speak, there are no PR people or lawyers between you and the way the executives think. One of the reasons I’m so bearish on Research in Motion (RIMM) for example is by listening to co-CEO Jim Balsillie’s answers on his calls for the last two years. The answers are jumbled and hard to follow. The logic is flawed. The boasts and claims seem detached from the world of reality we all live it. If this is how the co-CEO thinks, just imagine how this trickles down throughout all the decision-making in the rest of the company.
There are some great executives at Google. My favorites are Patrick Pichette at CFO and Shona Brown who is SVP of Business Operations. Both – in my view – will play a critical role assisting Larry in reshaping Google.
However, Rosenberg and Nikesh Arora have never impressed me. Rosenberg spoke the most of any Google exec on the earnings calls. While his answers could be followed – in contrast to say someone like Balsillie – he just wouldn’t shut up. He definitely seemed to love having the spotlight on him and didn’t want to give up the mic.
Larry Page wants greater efficiency at Google and he seemed to start by getting rid of the most loquacious senior executive. It’s a smart move – especially on his first day. It sends a message that there are no sacred cows or sacred executives.
It’s also highly logical (something always respected at Google). If Page’s chief reason for excising Schmidt was to “fix” Google, it’s unreasonable to think in a such a large company that the problem was only Eric. There must have been other people responsible for the arterial sclerosis of decision-making. Rosenberg was obviously part of the problem and, frankly, he’s redundant if he’s the product guy and Larry’s a product guy coming in to revamp the products.
But this house-cleaning won’t end here. There has to be at least one more senior exec to go and I think it’s Nikesh Arora. He’s not an engineer. He’s not in Page’s inner circle. He’s the next most senior and visible of Google execs after Rosenberg. And he’s frankly not that impressive on the earnings calls.
Remember when there was a rumor a few months back that he was going to bolt Google for another job (I think it was Twitter)? We’ll never know who planted that story in the press, but it sounded very Tim Armstrong-esque (the former Googler now running AOL (AOL) not very effectively). In other words, it seemed like a leak by Arora designed to raise the profile of Arora to Silicon Valley head-hunters – perhaps in anticipation of the need to move on.
According to some industry gossip, Arora and Page are like “oil and water.” Who knows? Arora, at least according to his Twitter feed, always seems to be jetting off around the world, dropping into Davos and hobnobbing with other global elites. I just don’t think Page believes the global elites are going to turn around Google right now. He believes – rightly or wrongly – that Google needs a stiff dose of garage bootstrap start-up mentality. That’s the exact opposite of flying private.
Watch for another shoe to drop at Google in the next month.
[At the time of publication, Jackson has no positions in the stocks mentioned.]

Why Nikesh Arora Will Be Next to Go at Google - Eric Jackson - Tech and China - Forbes