Google Inc (NASDAQ:GOOG, NASDAQ:GOOGL) is an icon of Silicon Valley, led by some of the best minds in tech.
But with a recent hiring of Ruth Porat, the CFO of major investment bank Morgan Stanley (NYSE:MS), Google is making a big leap to take the company into the real world of Wall Street and hard-nosed capitalism.
That’s undeniably a good thing for GOOG stock — and could hint at both a stronger balance sheet and the prospect of big dividends to come.
The news of Porat’s hiring away from Morgan Stanley broke this morning, and you can read the full announcement in Google’s newsroom here. But the bottom line is that she’s starting in just two months’ time, and reporting directly to CEO and co-founder Larry Page.
Porat has California roots and plays up her time in Silicon Valley and exposure to tech through her role on Stanford University’s board. But she is a finance person through and through — acting as vice chair of investment banking and helping work with the U.S. Treasury to unwind Fannie Mae and Freddie Mac during the depths of the financial crisis.
Surely there will be some “synergies,” as tech insiders like to say, with Porat’s focus on technology in investment banking. This could open up new revenue streams for financial services, but Google already seems to have so many irons in the fire via Google Fiber Internet access, self-driving cars and other fads that one more quirky project shouldn’t move the needle that much.
What GOOG stock investors may be fascinated by, however, is Porat’s familiarity with financing rounds of major tech stocks including Amazon.com, Inc. (NASDAQ:AMZN) and eBay Inc (NASDAQ:AMZN) when they went public during the dot-com days. This could certainly bolster Google’s efforts to grow via acquisitions — and ensure that investments are responsible in an age when tech valuations seem to be getting out of whack once more.
Also of interest is the fact that Porat is all too familiar with the role of a CFO as a steward of income for stockholders — and while GOOG stock has resisted paying a dividend thus far, it seems very likely to me that the tech giant will start returning capital to shareholders in the next year or two. After all, in addition to the substantial hoard of $67 billion in cash and investments, Google boasts some $20 billion in operating cash flow.
Large-cap tech stocks from Apple Inc. (NASDAQ:AAPL) to Cisco Systems, Inc. (NASDAQ:CSCO) have all made efforts to get serious about dividends in the last few years, and it’s time Google followed suit.
GOOG and GOOGL stock have been challenged in the last few several months as the company has struggled to get its ads business moving in the right direction. In fact, shares are actually slightly in the red over the last 12 months vs. 13% gains for the S&P 500 in the same period.
This changing of the guard in the CFO office may be just what Google stock holders need to start feeling optimistic again.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he did not hold a position in any of the aforementioned securities.
