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More Scrutiny Could Be Accorded By Pichai To Alphabet's Moonshot Ventures

More Scrutiny Could Be Accorded By Pichai To Alphabet's Moonshot Ventures
A section of Alphabet investors are hoping that a hard look at the cash-burning ventures that were strongly supported by the founders of Google will now be scrutinized extensively following the change of leadership  at the company with the stepping down of both the founders.
After looking after the company affairs for 21 years, both the co-founders of Google Larry Page and Sergey Brin announced their decision to step down from the management of the company as well as Google’s parent company Alphabet on Tuesday. This left current CEO of the Google Sundar Pichai to take complete charge of Alphabet as well.
Following the announcement, there was a 2 per cent surge in the share price of Alphabet on Wednesday. Some investors are hopeful that the pragmatic approach of Pichai and his experience of being associated with the core business of Alphabet could prompt him to reconsider the company’s attitude towards the money-losing projects fostered in recent years which had been launched by Page and Brin. According to analysts, taking responsibility for those so-called “moonshots,” projects undertaken by the company aimed to diversify the business of Alphabet would be among the main challenges for Pichai.
Certain projects that have never been able to completely convince investors and analysts at Wall Street, undertaken by Alphabet have seen investments worth billions of dollars being made in them. Such ventures included projects on self-driving cars, atmospheric balloons to deliver internet service, delivery drones and smart contact lenses.
“The question is, will they continue to spend money on these other bets? Under the new leadership, are they going to take a harder look at all of these businesses and start to try to focus more on ones that provide growth,” said Daniel Morgan, a portfolio manager at Synovus Trust Company, which owns Alphabet shares worth over $100 million. “That would add an extra excitement about the stock.”
Last year, an operating loss of $3.4 billion was reported by Alphabet for its Other Bets division which includes these ventures. At the same time, an operating profit of wads reported for Google’s operations. The challenge for Pichai now is to strike a balance between the short term losses being incurred by the bold, uncertain bets about future technology and the possible benefits they could have in the future.
Over the last two years, Alphabet has already cut back on investments in Other Bets as the Google’s parent company pumped in more investments into the cloud computing business of Google as well as its hardware businesses. Analysis predict that trend could be continued by Pichai.
“I don’t think this means they’re going to discard their other bets. I think they’ll continue to explore other potential business opportunities, but those may be under greater scrutiny,” said Peter Jankovskis, co-chief investment officer at OakBrook Investments LLC, which holds shares of Alphabet on behalf of its clients.
Faster decisions are expected of Pichai, said King Lip, chief investment strategist at Baker Avenue Asset Management in San Francisco, because he has been in Google for the last 15 years.   
He can execute more effectively without having to worry about stepping on the toes of Page and Brin,” Lip said.

Christopher J. Mitchell

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