Since Ruth Porat became chief financial officer of Alphabet (NASDAQ:GOOGL) on May 26, 2015, the Google stock price has increased 102%. That’s over $350 billion in shareholder value created in less than four years.
I admit to having been a Porat skeptic. Her experience at Morgan Stanley (NYSE:MS) did not inspire confidence in me. I’m here today to say I was wrong. I was as wrong as wrong can be. My fear was that Porat would strangle creativity at Google. I thought she would hand out dividends like candy, or take the company’s focus away from its primary mission of search.
Instead she created financial discipline, which included the creation of Alphabet itself. She has also become the de-facto CEO, allowing co-founders Sergey Brin and Larry Page to focus on other things.
Porat separated Alphabet’s moonshots into “other bets,” shut down what didn’t work like Google Fiber, given autonomy to the car unit under the name Waymo, and brought the home automation unit, Nest, back into the company when its spin-out didn’t work.
Porat has followed Amazon.Com (NASDAQ:AMZN) into voice interfaces, as Page once followed Apple (NASDAQ:AAPL) into phones, and it’s working. Now Porat is quietly following Apple into health with Verily, looking to build miniature glucose monitors, test for heart disease through the eyes, and conduct research into how people get sick.
Smart Plays and Google Stock
Alphabet hasn’t done a stock split, although at an opening price over $1,109 per share it easily could. Alphabet doesn’t pay a dividend, although with $100 billion in cash, and nearly $48 billion in operating cash flow last year, it easily could.
Instead Porat has put Google’s money to work. Alphabet put $25 billion in capital spending last year and hired an army of salesmen and support staff for Google Cloud. This has transformed that part of the company into an enterprise computing play.
To run it Porat lured Thomas Kurian from Oracle (NASDAQ:ORCL). He replaces Google board member Diane Greene, who had built that sales force. This has opened a market even bigger than search itself to the company.
While CEO Page has been missing in action, and Pichai has been put into the line of fire when the company’s search and privacy policies came under attack, Porat has been quietly implementing the larger corporate strategy.
The Bottom Line on Google Stock
Alphabet had revenues of $136 billion last year, and brought 23% of that money, $30.7 billion, to the net income line. Those revenues were up 23% over the previous year, and net income rose a stunning 150% from the previous year’s $12.6 billion.
Yet Porat’s moves into enterprise computing, into autonomous vehicles, and into the health care space are as audacious and growth-oriented as anything Amazon has sought to do.
YouTube has also, again quietly, become a third force in the streaming space alongside Amazon and Netflix (NASDAQ:NFLX) as Porat has deployed the capital created by Google’s dominance of search into bricks, mortar, service, and entirely new industries.
Had Porat been appointed CEO in 2015, instead of just CFO, she would be all over the business press right now. Her opinions would be sought on every subject from the future of technology to Brexit (she was born in Cheshire, England). She would be hailed as the queen of technology.
And Google stock would be the worse for it.
Instead she does her job, enjoys a stable home life, and is quietly positioning Alphabet to dominate the next decade as Amazon and Tesla (NASDAQ:TSLA) have dominated this one, only without the cult of personality.
The next time Google stock stumbles, I’m buying some Ruth Porat.
Dana Blankenhorn is a financial and technology journalist. He is the author of a new mystery thriller, The Reluctant Detective Finds Her Family, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in AAPL, AMZN, and MSFT.
