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Schmidt out as Google CEO, Q4 Profit Soars

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Search giant Google reported a double-digit increase in fourth quarter revenues on Thursday, topping analysts’ forecasts, but the company overshadowed its rosy financial performance with the announcement of a major shakeup in the ranks of its top executives.

CEO Eric Schmidt will step aside and assume the role of executive chairman, with co-founder Larry Page assuming the top spot.

Co-founder Sergey Brin, who currently serves as president of technology, will take “co-founder” as a formal title, and focus on new product development.

Google (NASDAQ: GOOG) said Schmidt will continue to act as an internal advisor to Page and Brin, but will devote his attention to other areas, including deals, partnerships and government relations.

“We’ve been talking about how best to simplify our management structure and speed up decision making for a long time,” Schmidt said in a statement. “By clarifying our individual roles we’ll create clearer responsibility and accountability at the top of the company. In my clear opinion, Larry is ready to lead and I’m excited about working with both him and Sergey for a long time to come.”

Said Page: “Eric has clearly done an outstanding job leading Google for the last decade. The results speak for themselves. There is no other CEO in the world that could have kept such headstrong founders so deeply involved and still run the business so brilliantly.”

The changes will take effect April 4.

Amid the bombshell news of the executive shuffle, Google turned in another solid financial performance, posting revenues of $8.44 billion for the fourth quarter of 2010, a 26 percent increase over the same period a year earlier.

Google reported earnings of $8.75 per share, well ahead of the $8.09 analysts had been expecting, and a hardy jump over the fourth quarter of 2009, when the company turned in earnings of $6.79 per share.

Net revenue for the quarter checked in at $6.4 billion, well ahead of the $6.06 billion analysts had been expecting.

The executive transition comes as investors are increasingly looking to Google to expand its revenue stream beyond the advertising revenue generated in mature markets from its core search engine. Yun Kim, an analyst with Gleacher & Company, looks for search revenues to begin to trail off in the coming years, placing added pressure on the company to diversify its balance sheet.

“We continue to maintain our thesis that, in the near-term, growth in search volume and CPC (cost-per-click) rate improvement in emerging markets are not enough to offset stagnant growth in its mature markets,” Kim said in a research note. “As a result, we expect a gradual decline in its search revenue growth from the high-teens towards the low-teens over the next few years, with the pace driven by the rate of declining growth in paid click volume.”

If that prediction bears out, it will highlight the importance of Google’s non-search business lines, such as its efforts to monetize Web video hub YouTube, enterprise applications and its growing display advertising unit, built around the acquisition of DoubleClick.

“We believe growth in its display business remains one of the key focus areas for investors, especially with signs that growth in its search business is peaking,” Kim said.

Kenneth Corbin is an associate editor at, the news service of, the network for technology professionals.

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