Did Google push Schmidt aside over Facebook challenge?

Analysts are mixed on why head of successful company has stepped away from top post, but one suggests Facebook is the issue

Google is easily the most dominant search engine in the world. And it's arguably the most influential Internet company.

So why, with Google going gangbusters, would company leaders decide that Eric Schmidt needs to step aside as its chief executive?

Google CEO Eric Schmidt
Outgoing Google CEO Eric Schmidt (Photo by Reuters)

That's one question that's bringing in a lot of different opinions among industry analysts and pundits in the blogosphere. While some say that Schmidt, with his too-frequent foot-in-the-mouth comments about privacy, might have worn out his top-dog welcome, others say the change represents a natural transition as company co-founder Larry page -- a little older and more seasoned now -- takes the reins.

But one analyst is speculating that Google is realigning itself to better take on recent rival Facebook.

"I was quite surprised," said Whit Andrews, an analyst at Gartner. "There certainly was nothing going on in the industry where people were saying something is coming. Google's results have been extraordinary. But they do face a unique and extraordinary challenge in Facebook, and that must be heeded in evaluating their long-term opportunity."

And even though Google has taken on some major challengers like software giant Microsoft, Andrews said Google obviously didn't think Schmidt was the right person to tackle this new foe.

"There is no making Facebook go away," he said. "Now, for the first time ever, Google will have to coexist. They clearly feel that Page is the man to accomplish that in the future."

News hit Thursday afternoon, during Google's 2010 fourth-quarter earnings report, that Page will take over as Google CEO in April from Schmidt, who will remain with the company as executive chairman.

While the company framed the change as an attempt to streamline Google's top-executive line, Schmidt himself said his new job will have him focusing on relations with customers, partners and government.

Rob Enderle, an analyst at Enderle Group, pointed out that Google co-founders Page and Sergey Brin had wanted Schmidt to act as the company's CEO out of the gate because they didn't feel they had the experience to do the role justice.

Larry Page
Larry Page, Google's co-founder, with CEO Eric Schmidt, right. Source: Reuters/Rick Wilking.

"You had a couple of guys out of college who didn't know how to run a company, so they [brought Schmidt in] so they didn't make any obvious mistakes and make investors uncomfortable," Enderle said. "Young companies often need an adult -- somebody who's experienced -- to initially run them, and then when the company hits maturity, the founders can take over."

However, he also said they kept Schmidt on in the company's top position too long.

Enderle said Schmidt has made several missteps over the past several years, including repeated controversial comments about users' privacy.

"It was very clear during the China brouhaha that Eric and Larry were on different pages," said Enderle, adding that he expects Schmidt to soon leave the company entirely.

"I think it became obvious to everybody that Larry [should] start running the company he created. The training wheels needed to come off," Enderle said.

But not everyone thinks that Schmidt had worn out his welcome.

"I don't necessarily see this as Schmidt being pushed aside," said Dan Olds, an analyst at Gabriel Consulting Group. "I think that it's mostly that Page and Brin have grown into their roles and that Google has cultivated their internal management."

Olds also noted that having Schmidt focus on government relations right now could be a good strategic move.

"I think that government relations are going to be increasingly critical to Google," Olds said. "The company has gotten more than a little attention on how they're using user data, and in some geographies, governments are getting involved. Google needs a heavy hitter to help guide, manage and hopefully quell this activity. Schmidt is that guy."

Brad Shimmin, an analyst at Current Analysis, noted that if Google was unhappy with Schmidt or the way he communicates with the press or public, the company wouldn't put him in a position where he'll be dealing with governments and major companies.

"I think, if anything, this reorganization puts Eric Schmidt in harms way in that he will be interfacing with the company's strategic partners," Shimmin said. "I think this stands as a definitive vote of confidence more than a move to insulate Eric from the outside world."

Shimmin added, "My feeling is that the move was amicable and something all three players have been looking forward to."

Sharon Gaudin covers the Internet and Web 2.0, emerging technologies, and desktop and laptop chips for Computerworld. Follow Sharon on Twitter at  @sgaudin or subscribe to Sharon's RSS feed . Her e-mail address is sgaudin@computerworld.com.

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