"We've long believed that over time that companies tend to get comfortable doing the same thing, just making incremental changes. But in the technology industry, where revolutionary ideas drive the next big growth areas, you need to be a bit uncomfortable to stay relevant.Our company is operating well today, but me can make it cleaner and more transparent"
Talking about the Four Horsemen of tech--Cisco, HP, IBM and Microsoft--we feel that it isn't at all guaranteed that all of these players will stay relevant to their customers just by shuffling the asset deck among separate companies, or by just selling businesses.
Concerning IBM, it has been reported that Berkshire Hathaway has continued to buy IBM shares, thereby somehow comforting retail investors that holding on is a good thing. Tech darlings can become irrelevant: remember Digital Equipment, the darling of Harvard Business School professors for their innovation and culture? Remember Wang Labs? Remember Cray Research? (not the current company) It can happen.
It can happen to Microsoft too. Larry Page hits the nail on the head. You need to stay relevant, and incremental changes, like reorganizations or shuffling executive portfolios, won't do it. Big company boards and executives like stability and comfort: being uncomfortable is a cultural shift, which IBM, Cisco, HP and Microsoft all need, some worse than others, but all basically the same.
To be fair, though the BRK analogy has some flaws. Berkshire Hathaway works for, among several reasons, the capital reallocation process from subsidiary income dividended up to the holding company level, where Warren Buffet, checked by Charlie Munger, makes the critical decisions. I suspect these decisions will continue to be made by founders Page and Brin, with a bias towards the long-tailed investments. More clarity is needed here.
Sundar Pichai has earned his spurs in the core businesses, through managing and growing several very large ventures, and it's great that Google's founders have moved rapidly to put the company jewels in safe hands. He will need some help dealing with Wall Street and adding other duties to his operating portfolio, but this kind of transition is done very slowly at most NYSE-size companies. Here it was done with a quick strike, but there's nothing wrong with that.
Shareholders have reasons to have expectations biased to the upside. Their co-CEOs have been listening and reflecting, as engineers often do, but they have acted at a stroke, which engineers are often wont to do.
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