Watch CBSN Live

Google Earnings: Good, but Not Good Enough To Keep Schmidt as CEO

The news that Eric Schmidt will step down as Google's (GOOG) CEO had interesting timing, coming just a half hour before the company announced its 2010 results. Schmidt remains as executive chairman, Larry Page becomes CEO, and Sergey Brin focuses only on strategic projects.

It's not as though last quarter or even the entire year was bad. For most companies, a 24 percent year-over-year jump in revenue and a 30 percent boost in earnings would be exactly what Schmidt called Google's FY2010: stellar. For the first time, the company had more than $1 billion in non-advertising revenue. And yet, Google isn't just any company. Given the context, stellar just isn't good enough and diversification hasn't happened quickly enough.

Apple (AAPL), Google's current major competitor on the all-important mobile front, just reported a 70.5 percent rise in revenue for last quarter. Plus, the iPhone brings in $625 apiece at margins of around 70 percent. The iPad has defined a product category, just as the iPod did.

At Google: One disappointment after another
Google, meanwhile, has had one new product disappointment after another, whether it was the Nexus One Google-branded smartphone, the collaborative Wave system, or Buzz, Google's poorly conceived foray into social media. The company's big hits -- Android, search advertising, and display advertising -- were all the result of acquisitions. And yet, Google spends an unusually high percentage of its revenue on R&D: 12.8 percent for 2010. By comparison, last quarter, Apple spent 2.2 percent on R&D.

Google has to learn to move more efficiently in useful directions and to avoid squandering money on misguided efforts. It may be that co-founder Page will be able to pull this off, taking charge of daily operations as well as product development and technology strategy.

And yet, Schmidt is supposed to focus "externally on deals, partnerships, customers and broader business relationships, government outreach and technology thought leadership." So who's actually in charge? Until this becomes clear, don't expect next quarter's numbers to hit an Apple stride.


Image: morgueFile user kakisky.
View CBS News In