The axman comes to Google

New finance chief Pichette has few Web credentials - but a lot of experience cutting costs.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Adam Lashinsky, editor at large

google_axman_photo.03.jpg
Since Google's CFO Patick Pichette started, the company has shut down numerous projects, and had its first layoffs.

(Fortune Magazine) -- In retrospect, Google investors should have realized last June that the search giant's era of hypergrowth was over. That's when the company announced that Patrick Pichette, the top operations executive at BCE, parent of Canada's biggest phone company, would be Google's new chief financial officer.

Pichette isn't your typical tech executive: He didn't cut his teeth in Silicon Valley, and his web credentials are thin. No, the far more relevant experience on Pichette's resume was the time he spent heading up a three-year cost-cutting and efficiency drive that reduced operating costs at Bell Canada by $2 billion.

That's right: Google (GOOG, Fortune 500), among the most chaotic, profligate, unfocused, engineering-oriented, and self-proclaimed recession-resistant of organizations, had reached outside the Googleplex for a real business executive and charged him with ensuring that Google's freewheeling culture wouldn't become its own worst enemy.

Call it, in the words of redoubtable analyst Mary Meeker, "Right guy, right time." Just as Google's business has shown unmistakable signs of slowing, Pichette, a 46-year-old Canadian who was a Rhodes scholar and a McKinsey consultant in his younger days, has begun to make his mark.

Since he started as CFO on Aug. 1, Google has shut down numerous projects, facilities, and perks, from the seemingly trivial - an unneeded gourmet caf at its headquarters, the annual companywide ski trip - to the significant. The latter includes the termination of a major effort called Lively, a virtual-environment product that mimicked Second Life, and the shuttering of a failed acquisition, dMarc Broadcasting, through which Google had attempted to broker radio advertising. In January, Google publicized its first layoffs, the termination of 100 recruiters made redundant because the company has dramatically reined in its hiring.

All this might have happened, of course, without Pichette. Yet as Google confronts a climate in which its once otherworldly growth is merely impressive - revenues grew 18% in its most recent quarter - it has turned to someone ideally suited for the new reality. "Patrick was known for a close attention to details and an ability to drive efficiencies in the organization," says Jonathan Allen, a telecom analyst with RBC Capital Markets in Toronto.

That same attention to detail is turning heads among the analysts and investors who follow Internet companies. In the fourth quarter Google's operating expenditures of $330,000 per employee declined 6% from the year before; capital expenditures declined 46%, to $368 million; and free cash flow jumped 73%, to $1.75 billion. "Investors absolutely appreciated the discipline on expenses," says Tony Ursillo, an analyst with asset manager Loomis Sayles, which holds 450,000 Google shares.

Despite having introduced green eyeshades to Google, Pichette has fit in quickly. An avid outdoorsman - he is known for far-flung fly-fishing expeditions to locales like Russia or the extreme reaches of northern Canada - he bikes to work and took easily to Google's casual vibe. Admirers praise his ability to get along. "He's an extraordinarily clear-sighted operator - almost like an HR person in his ability to read people," says recruiter Martha Josephson of Egon Zehnder International, which placed Pichette at Google. He also astutely knows it's best for a cost cutter to avoid boasting: He declined to comment for this article.

One Pichette fan who appears eager to show his support publicly is CEO Eric Schmidt, who told analyst Meeker at a recent Morgan Stanley investor conference that Pichette is "particularly good at doing business reviews" and that Google is now going through a review process "systematically, business after business."

Any other company with a $100 billion market capitalization might be embarrassed to acknowledge that such standard fare was a novel concept. Then again, Google isn't any other company. It can only hope its new CFO helps it stay that way.  To top of page

Company Price Change % Change
Bank of America Corp... 16.20 -0.13 -0.80%
Apple Inc 102.13 1.24 1.23%
Facebook Inc 74.63 -1.33 -1.75%
Yahoo! Inc 38.18 0.39 1.03%
Pfizer Inc 29.49 0.28 0.96%
Data as of Aug 27
Index Last Change % Change
Dow 17,122.01 15.31 0.09%
Nasdaq 4,569.62 -1.02 -0.02%
S&P 500 2,000.12 0.10 0.00%
Treasuries 2.36 -0.03 -1.25%
Data as of 3:58am ET
More Galleries
'My biggest retirement mistake' Five CNNMoney readers share stories about saving that you can learn from. What they would do differently if they had another chance. More
Inside a $60,000 vacation of a lifetime Private jet tours around the world are growing in popularity, with a number of companies cropping up to take travelers on luxe, bucket-list trips. Here's a look at one 17-day journey, run by TCS Expeditions, that will take 78 people to some of the most lusted-over destinations. The price: $60,000 per couple. More
Don't want a bigger iPhone? Here are 6 alternatives Apple's next-generation iPhones are set to be the largest ever. But for those of us who don't want to give up any more space in our pockets, here are a few smaller options. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.