When Eric Schmidt left the helm of struggling software company Novell (NOVL
) to lead search giant Google in March, 2001, he stepped into both a dream job and a sea of doubts. A research geek who had done stints at Bell Labs and Xerox PARC before heading Sun Microsystem's JAVA software development project, Schmidt felt right at home in a company with the highest percentage of computer science PhDs on the planet and an office culture of lava lamps and wandering pets.
On the other hand, he inherited the delicate task of transforming a rambunctious company, shaped by its irascible boy-genius founders, from a startup with populist tendencies to a serious corporate contender with real growth and profits. He also had to improve on success, never an easy task, particularly when you're taking over a product that attracts 150 million daily queries and is the clear search-engine leader in North America. Plus, he had to please a board that includes John Doerr, one of the most influential venture capitalists in Silicon Valley.
So far, so good. Rather than try to upstage founders Larry Page and Sergey Brinn, Schmidt has become the invisible CEO, eschewing interviews and letting Page and Brinn do the talking. Behind the scenes, though, Google insiders say Schmidt has brought much-needed focus on profits and revenue-stream diversification. "He has brought us up another notch in terms of financial controls and acting as if we are a publicly traded company," says Omid Kordestani, Google's senior vice-president for worldwide sales.
CORPORATE PLAYER. Schmidt has also started to see some payoff from his efforts. In May, he played a key role in snagging a contract with America Online from Google's chief rival, Overture. Then in June, he rolled out a search device that businesses can connect to their corporate networks to handle queries on their Intranets and Web sites.
That puts Google in the corporate search market with outfits such as FAST, Inktomi (INKT
), and Verity (VRTY
), where hundreds of millions of dollars are in play. "Eric is helping them find new ways to use the technology they have built. He's very good at expanding on a technology," says Chris Stone, a longtime colleague and vice-chairman of Novell.
Google initiatives such as its AdWords program, which allows companies to place ads on search-results pages that are keyed to the search terms, has continued to grow smartly despite the advertising downturn. Google has grabbed several new corporate advertisers, including Acura, Eddie Bauer, and Expedia.
TOO POPULAR? The biggest concern blotting this rosy picture may be whether Schmidt will run afoul of some of Google's partners. The Google.com site is so popular itself that big customers such as AOL and Yahoo! could become annoyed that their search provider is poaching customers who would otherwise come to them. Indeed, on Sept. 23, Google made a big move into the news-search business by launching a free tool that scans 4,000 English-language sources and updates content every 15 minutes to track breaking stories.
Google has also struggled to make inroads abroad -- and Schmidt isn't known as a global strategist. And the CEO could have trouble in the future navigating between the wishes of Google's founders and its investors. Page and Brinn have made it clear that they want the business to grow, but on their terms -- meaning as a pure search company that has a significant public-service focus. That could conflict with Schmidt's profit aspirations -- especially if Google ever goes public.
Some observers question whether Schmidt is enough of a showman to lead an IPO. "I think Eric likes it as a private company," says Stone. Indeed, it's hard to argue with the 100% growth -- and $100 million in annual revenue -- that Google is said to enjoy only three years after its 1999 launch. And in a punishing stock market, who needs the pressure of trying to keep that up? By Alex Salkever, Technology editor for BusinessWeek Online