The axman comes to Google

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

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By Adam Lashinsky, editor at large

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

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