Shares of search giant Google Inc. GOOGL dropped 2.4%, touching a low of $554.73, before closing a notch higher at $555.01. Shares moved down after the company revealed the retirement plans of its Chief Financial Officer (CFO), Patrick Pichette, in a regulatory filing with the Securities and Exchange Commission.
Canadian-born Pichette joined the company as financial chief in Aug 2008 before which he worked at Bell Canada. He joined the company at the time of the Great Recession. His leadership enabled Google to discipline its finances and spend sensibly by curtailing uneconomical expenses. Pichette in his seven-year tenure helped the company to achieve steady financial growth, thereby enabling it to gain a significant position in the competitive tech industry.
The exact date of retirement is yet to be determined but it will be within the coming six months. Pichette will help in the search for his successor to enable a smooth transition of CFO duties.
There have been quite a few CFO retirements in the tech space lately. Apple Inc. AAPL, Facebook Inc. FB, Twitter Inc. TWTR and Amazon.com AMZN have already replaced their CFOs or declared plans to do so in 2014.
Investors don’t seem to be pleased by the announcement as reflected in the share price reaction to the news. The announcement comes when the search giant is facing certain amount of pressure in its attempts to return growth to its core business, display advertising, which has been hindered by consumers' varying search preferences, particularly on mobile.
Investors seem to be worried about the company’s struggle to succeed in the mobile era and its inability to increase monetization on mobile devices. They are also fretting over its huge investments in technology that have little or nothing do with the company's main business of Internet search and advertising, which is impacting its profits.
The failure of its efforts was evident in its last earnings report also. Google reported a huge miss in its fourth-quarter of fiscal year 2014. Google’s fourth-quarter earnings of $5.50 missed the Zacks Consensus Estimate by 36 cents, on revenue that missed by 2.5%. Earnings also dropped 3.3% from a year ago, while increasing 12.0% sequentially.
Moreover, Google has missed estimates in the last four quarters, generating a negative average surprise of 4.12%.
Pichette’s exit from the company will certainly affect its functioning, especially in the current scenario. But given its strong product portfolio, we expect Google to overcome the hurdles and remain immensely powerful and influential.
Currently, Google holds a Zacks Rank #3 (Hold).
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