By Justin Baer, Rolfe Winkler and Vipal Monga
Its stock lagging and investors grumbling, Google Inc. reached
out to Wall Street, hiring Morgan Stanley's Ruth Porat as its new
finance chief.
Ms. Porat, 57, is a one-time investment banker on technology
deals who served the past five years as Morgan Stanley's finance
chief. She led the firm to steadier ground following the financial
crisis, shrinking the balance sheet, shedding some risky activities
and doubling down on a wealth-management division that promises
stable profits.
At Google, she replaces Patrick Pichette, who said earlier this
month that he would retire after almost seven years as finance
chief. Google said Ms. Porat will start on May 26.
Her move traces a well-worn path. Wall Street employees, from
junior ranks to bright stars, have migrated to Silicon Valley in
recent years amid a technology boom and new rules constraining
financial firms.
Twitter Inc. CFO Anthony Noto is a former analyst at Goldman
Sachs Group Inc. Another Goldman veteran, Sarah Friar, is the CFO
of Square Inc., a richly valued payments startup. Former Credit
Suisse Group AG banker Imran Khan is strategy chief at messaging
app Snapchat Inc.
But few banking executives as senior as Ms. Porat have made the
shift.
"After a 28-year career at Morgan Stanley, Ruth Porat has
decided to leave the firm to take on a new role in Silicon Valley
and return to her California roots," Morgan Stanley Chief Executive
James Gorman wrote in a company memo. "It is with a heavy heart
that we see her go."
Ms. Porat grew up in California and earned a degree from
Stanford University. During an earlier stint at Morgan Stanley, she
served as co-head of investment banking to technology companies and
helped bring Priceline.com Inc., eBay Inc. and Amazon.com Inc.,
among others, public in the 1990s.
Ms. Porat also advised on some of Morgan Stanley's
highest-profile assignments during the financial crisis, including
the government takeovers of Fannie Mae and Freddie Mac., and worked
with the Federal Reserve on its rescue of insurer American
International Group Inc.
She almost left the investment bank two years ago as a candidate
to be the deputy Treasury secretary but told the Obama
administration she wasn't interested in the position. The Wall
Street Journal previously reported that her interest declined after
she saw the grilling Treasury Secretary Jacob Lew received during
his Senate confirmation hearings.
Google declined to comment, or to make Ms. Porat available.
In a memo to Morgan Stanley employees, she wrote, "It is now
time for a change for me, and back to the future to another place
that is creative, energetic and fun. It is a big move to
dramatically different scenery and a new focus, in the same
neighborhood where I grew up and went to school."
To succeed Ms. Porat, Morgan Stanley named Jonathan Pruzan, a
46-year-old investment banker who co-led the team that advises
banks and other financial-services companies.
She arrives at Google during a rare moment of investor unease,
at a company whose stock has risen nearly seven-fold in less than
11 years as a public company. Over the past 12 months, Google
shares are essentially flat, compared with a 19% rise in the Nasdaq
Composite Index. Wall Street cheered her selection, driving up the
company's shares up 2% on Tuesday.
Google's net profit margin has slipped, to 22% in 2014, from 26%
in 2011, before it bought the mobile-devices division of Motorola
Mobility Holdings Inc. (Google sold the unit last year to Lenovo
Group Inc.)
"Google is becoming a conglomerate, which is kind of the
antithesis of financial discipline," said Brian Weiser, analyst at
Pivotal Research Group. He pointed to expensive investments in
areas like YouTube, which carry lower margins, or Internet access
that aren't core to Google's advertising business.
Google added more than 5,000 employees, to 53,600, in the last
six months of 2014.
In its press release announcing Ms. Porat's hire, Google
highlighted her record of fiscal discipline at Morgan Stanley. "As
CFO she helped improve resource optimization across different
businesses through better capital and funding allocation, as well
as expense reductions."
Some investors also want Google to distribute some of its cash
through buybacks or a dividend.
"With $65 billion in cash, the question is how they are going to
put it all to work," said Kevin Stadtler of technology investment
firm Stadtler Capital Management LLC, which owns Google shares, and
praised the hire. "When you have a Wall Street CFO entering your
business, you will have a very efficient capital structure."
But Mr. Weiser said those pleas may be "pushing on a string,"
since co-founders Larry Page and Sergey Brin control the company
through super-voting shares and view the cash position as providing
strategic flexibility.
At the same time, Google's top brass is engaged in a fierce war
for talent in Silicon Valley, and has long used its richly valued
shares as a way to attract and retain employees.
Ms. Porat is known as a strong advocate for women in the
investment and corporate worlds. She's one of the hosts of Morgan
Stanley's Executive Women's Conference, which brings together
female bankers, investors and executives for two days annually in
New York City.
Judy Brown, CFO of Perrigo Co., has attended an annual dinner
Ms. Porat hosted for female chief financial officers at the 21 Club
during this year's conference, on March 10. Ms. Brown said there
were 10 to 20 other women CFOs in attendance. She declined to name
them but said they included executives from technology, media,
utilities and retail sectors.
"The events themselves involve substantive conversations about
pressing geopolitical issues," said Ms. Brown. She said past topics
have included discussions of large corporations' stance on minimum
wage, for example. "It's a great way to have an open dialogue about
these topics."
Write to Justin Baer at justin.baer@wsj.com, Rolfe Winkler at
rolfe.winkler@wsj.com and Vipal Monga at vipal.monga@wsj.com
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