Ballmer Says Google's Growth Is 'Insane' 420
eldavojohn writes "Steve Ballmer spoke to the Seattle PI this week, commenting that Google's pace of employee growth is 'insane,' and the company has few successful businesses outside of Internet search and advertising. He referred to Google's non-search efforts as 'cute.' Google's current number of employees is nearly doubling each year. 'I don't really know that anybody's proven that a random collection of people doing their own thing actually creates value.' Mr. Ballmer went on complain that, in general, competition for good programmers has become an issue. Even 'hedge funds' are looking for skilled coders, making the HR fight between the two companies that much more challenging."
Let the chair throwing commence (Score:5, Insightful)
ROaaarrrr!!!! We are finding ourselves *hoot hoot* having to spend more money to hire quality programmers *scratch*. *Beats Chest* Google BAD!
Slasdotters Say Ballmer Is 'Insane' (Score:5, Insightful)
Ok, joking aside, am I the only one who finds Balmer's complaint a bit hypocritical? It's true that Microsoft has incredible sums of cash. However, Windows and Office are pretty much the only things making Microsoft that cash. Nearly every other portion of the company either contributes very little to the bottom line, or actually loses Microsoft money. I imagine that's part of the reason why Microsoft keeps bundling extra software services with Windows: At least it raises the value of the software package. (In theory, anyway.)
That being said, I am going to (*gasp*) agree with him on one point. Having a bunch of programmers sitting around does not accomplish anything. They have to be in a full-on creative environment to do the truly impressive stuff. I think that the environment is slowly dissolving as Google loses it cohesion as a tight-knit company. They're growing incredibly fast, and I'm not sure they're really getting a good return on that growth. Obviously, only those inside the company can actually know that for sure, but it's not looking as good as it once did for those of us on the outside.
Re:Let the chair throwing commence (Score:2, Insightful)
Hedge funds (Score:5, Insightful)
This article can be summed up in one word.... (Score:3, Insightful)
He may have a point (Score:5, Insightful)
Throwing more resources at a problem isn't always the best way to solve it. For crying out loud, if anyone should know that it's Ballmer.
A business I worked at several years ago did the same thing. Grew too fast and outpaced the market. Wound up running out of cash and having to lay off all those new hires. One guy was an employee for two weeks. I helped interview the guy, too.
rebuttal (Score:5, Insightful)
It doesn't sound like Mr. Balmer's been paying that close attention to the FOSS phenomenon. As far as I can tell a random bunch of people doing their own thing for the last 10-20 yrs have achieved just as much as traditional software business models, in some case more and in more profound & lasting ways.
Re:Slasdotters Say Ballmer Is 'Insane' (Score:5, Insightful)
I do agree with you that their rate of growth is not sustainable, but I also suspect that as soon as it slows, people will immediately go "Google's hiring is down! Are they in trouble? Are they just not good enough to stand up to Microsoft after all?"
Microsoft is now the old IBM (Score:5, Insightful)
I remember Bill Gates once saying that his worst fear for Microsoft was to become the next IBM - in other words, a big slow moving business with many levels of bureaucracy (this was some years ago and he was talking about the "old" IBM).
Well, it looks like Bills worst nightmare has come true, as evidenced by Ballmers comments. Google is now what Microsoft used to be - a lot of small teams working on their own projects without levels of bureaucracy interfering.
Straw Men (Score:5, Insightful)
Google is not a random collection. You don't need to prove anything. Ballmer is not the authority on the matter. They are not all doing their own thing.
This is a CEO?
Memo to Ballmer (trolling Ballmer) (Score:3, Insightful)
Meh... (Score:2, Insightful)
Re:Slasdotters Say Ballmer Is 'Insane' (Score:5, Insightful)
From their about google page:
l4hRe:Slasdotters Say Ballmer Is 'Insane' (Score:5, Insightful)
Either Ballmer's an idiot or in denial. I'm feeling it's a little from column A and a little from column B.
Re:Microsoft jokes aside, (Score:5, Insightful)
To me, that sounds a *hell* of a lot better than doing someone else's ideas, but poorly, but having enough money and tenacity to wait out your failing competition.
Maybe that's just me, though.
Re:Microsoft jokes aside, (Score:5, Insightful)
Microsoft Corporation is a multinational computer technology corporation with global annual revenue of US$44.28 billion and 76,000 employees in 102 countries.
Google Inc. had 10,674 full-time employees as of December 31, 2006, Revenue $10.604 Billion USD (2006)
Which company looks more bloated?
Re:Why does Steve Get Newstime? (Score:4, Insightful)
Re:Hedge funds (Score:2, Insightful)
This would be a good reason for hiring more employees.
Re:Slasdotters Say Ballmer Is 'Insane' (Score:5, Insightful)
They do make a fair amount of money through their ad system but they are yet to produce anything else which isn't running at a loss. Besides, most stock-market analysts will agree that unless Google can pull something out of their hat in the next few years, their valuation is simply insane.
Re:Slasdotters Say Ballmer Is 'Insane' (Score:5, Insightful)
Remember this is MS. Everything is reverse in MS world. i.e. They are innovating when they copy other companies. The Apple phone doesn't offer any new features. Linux is full of their IP. And it goes on and on.
Well some of their divisions really do nothing for Windows. Like the Xbox. Its a huge money loser. It doesn't add to Windows or Office. Xbox is about taking the market from Sony and Nintendo. Period. When other companies lose $4 billion on a division or product over several years, the product gets cancelled or overhauled. What I mean by overhaul is in the strategy. MS did neither. It just followed the same strategy and upgraded the hardware and software specifications for the Xbox 360.
Yes but even if they are working, are they actually producing anything worthwhile? MS spends about $1 billion a quarter in R&D. Over the last five years, all they've managed to do is to produce an OS that in my opinion, a woeful copy of OS X. It's not that they don't have good people and that their people don't work. It's that the direction of the company is lacking.
To me, Microsoft's problem is that their main goal it to compete with anyone who might threaten their monopoly. Their goal is not to make a good product but to beat everyone else. IE was only innovative up until Netscape lost. Then development stagnated until Firefox became a threat. MSN Search was just an ordinary search engine. Then Google showed up. MSN Search was overhauled to compete. Apple conquered the MP3 player market. MS now wants a piece of that market.
Ballmer's talking about Microsoft. (Score:4, Insightful)
Microsoft, 1980, one successful business, compilers and programming languages.
Microsoft, 1990, one successful product, operating systems. Their language business has become part of the support for their OS business.
Microsoft, 2000, finally have a really *solid* operating system for the first time since they dumped Xenix, and a handful of secondary businesses leveraged off their OS business.
It took Microsoft over 20 years to get to the point where they were more than a one-product company, and they're really not good at all where they can't use their position in the OS market to give people a magician's choice of products.
If google has a few successful businesses outside of Internet Search they're doing better than Ballmer did over the same period in the company's life cycle.
Robotic, cookie cutter hiring (Score:5, Insightful)
Google contacted me for an interview (I never applied). My phone interview with Google grilled me on undergraduate algorithms like graph traversal. Thats pretty much it. Now my undergraduate degree is actually Electrical Engineering, but my graduate research has been mostly software development. I'll admit I didn't remember details on many algorithms (never actually took an algorithms class), but I'm sure I could code up Diikstra's Algorithm once I read it over from a textbook.
Needless to say I was quickly rejected from Google. Why they contacted me for an interview and then tested me on things I have little background on, I have no idea. The interviewer even admitted to me that he actually doesn't use any of this stuff in his day-to-day job.
Thus I'm skeptical when these companies claim that they can't find people. They may have a hard time finding people that fit the exact cookie cutter they are looking for.
Re:Slasdotters Say Ballmer Is 'Insane' (Score:5, Insightful)
Yes. And that one thing is sell advertisements. Just like magazines. Only instead of editorials, infographics, and stories, Google uses search and nifty Web and network enabled apps to attract eyeballs.
Google's army of coders building "cute" apps are no different than a magazine's editorial staff and contirubuting writers writing targeted content that some demographic enjoys reading. Google's coders are just building content to bring viewers to the site.
Now, Google may bring all the world's information together, but that's only because it happens to help sell advertisements. If people stopped becoming interested in information, Google would look for other ways to attract viewers. Like...er...buying YouTube...
Google's business model an excellent model for developers. Using advertising to pay for developer's projects is really a holy grail for developers. You don't have to build the perfect product or meet external specs. You just need to build something cool and have fun doing it. And, you get to share it without of the traditional software strings attached. Very cool model.
-Chris
Interesting issue (Score:4, Insightful)
Re:Slasdotters Say Ballmer Is 'Insane' (Score:5, Insightful)
Another interesting thing about Google's model is that, compared to traditional Madison Street advertising companies, most of Google's revenues come from small to medium-sized businesses. They've levelled the playing field when it comes to buying advertising space, allowing a mom-and-pop shop to compete directly with a mega-conglomerate. What I find most interesting about this model is that I believe it to be fairly immune to business cycles. While large companies will expand and contract their advertising budgets based upon their bottom line, Google will receive relatively constant business from the mom-and-pop shops, whose advertising budget is both small and fairly constant regardless of recessions or expansions. We'll have to see how Google does through the next recession, since during the last recession they were still growing market share far faster than the economy was contracting. My bet is that Google becomes a safe haven for investors during recessions as a result.
Finally, despite Google's phenomenally high P-E ratio, Google is currently fairly well valued, at least according to Free Cash Flow models. According to my research (and please don't take my word for it, do your own research--the results I found were startling to say the least), the FCF model was the only model that was significantly better than a random walk in predicting company valuations. Google has a high P-E ratio not because it is overvalued. They have a high P-E ratio because they have fantastic (and improving!) profit margins and revenue growth. Can it continue? Well, past performance is certainly no guarantee of future performance, but based on what I perceive to be a business model with a clear and sustainable competitive advantage, and a relatively non-existant connection to recession/exapnsion, I believe they will be able to sustain strong revenue growth and stable or improving profit margins for the next 3 years at the least. Plug in those assumptions to a FCF model, and you'll find that GOOG is fairly valued, if not undervalued.
That's my 1.5 cents (inflation is a bitch).
-dan
Re:Slasdotters Say Ballmer Is 'Insane' (Score:5, Insightful)
The voting power in Google stock is very narrowly held, and deliberately so because the founders wanted to go public without giving effective control of the company to outside investors.
With a company thats direction is narrowly controlled by a small group, you can't assume that everything is about financial profit as much as you can with a widely held company.
One might just as well argue that Google sells ads, because that's the only way to bring in the money to bring the world's information together.
Of course, the reality probably combines both: Google's leadership is probably interested both in profit and bringing information together, and has found a way to have the two reinforce each other.
Re:Jealous much? (Score:4, Insightful)
Why? What's wrong with their business model, why would it fail?
Nothing, but there is such a thing as an overvalued share price and Google is the textbook example. There are other shares that are worth even more than Google, Berkshire Hathaway comes to mind, but those companies tend to generate a lot of actual real cash value each year. If one discounts the advertising revenue, which is by all accounts meager compared with the current share prices, then it becomes extremely difficult to estimate how much the remaining value, including intellectual property, human capital, and experience may eventually be worth. It is not *zero* to be sure, but exactly how much and when? The answer to that question determines how much you are willing to pay for a share and how much you ultimately earn in that investment depends upon how accurate your initial estimation was. In the meantime your $400+ dollars per share are NOT earning money doing something else. It is a substantial risk and one that not every investor is necessarily willing to take. On, the other hand, "there is a sucker born every minute," or so the saying goes.
Their revenues are increasing, and search-related advertising is hardly going to disappear -- never mind their expansion into other types of advertising.
Yes, but see above for why this does not necessarily a good investment make...
As for rate of growth, define growth. You mean rate of employee growth? Sure, exponential growth is unsustainable. But with gross profits over 6 Bn on revenue over 10 Bn, I think they've got pockets deep enough to continue to hire freely -- never mind the cash reserves of 11 Bn.
I think that he meant employee growth, but even employee growth must be justified in terms of additional value created for the business. It does not matter if the company has a bankroll of $10 x 10^4 or $10 x 10^7 dollars. If the business cannot earn at least $1 plus prime interest rate or 10 year treasury rate (4.45% currently) then that dollar should be returned to the shareholders in dividends after all of the expenses have been paid. Reinvestment is not always a good idea, it depends upon the current economic climate and the potential returns. The fact that Google has 11 Bn cash reserves is immaterial to this point.
Think about it. If they pay $200,000 annually (incl benefits) for good employees, they can still hire 30,000 of those people while still turning a gross profit.
The company is generating money based upon advertising revenue and EXPECTED future revenues in the form of inflow of investor money, but this does not necessarily mean that each employee is generating a gross profit by their direct efforts.
Assuming, of course, that their revenues don't drop off, which would run counter to almost every analyst's predictions.
If you are an investor in Google right now, especially if you didn't get in real early (and who but the insiders did?), you had better hope that not only does revenue NOT drop off, but that growth doesn't slow either because you are going to need some pretty powerful revenue growth to come out ahead at $400+ per share on P/E ratio of 40+.
Re:Slasdotters Say Ballmer Is 'Insane' (Score:5, Insightful)
Re:Slasdotters Say Ballmer Is 'Insane' (Score:4, Insightful)
If google doesn't do a serious revamp of their search algorithm, I'd expect their search share to start sliding soon.
Touche incoming (Score:3, Insightful)
So much for the free market, then
Re:Robotic, cookie cutter hiring (Score:2, Insightful)
How am I suppose to know that Google wasn't contacting me for my lower-level embedded systems knowledge and experience? Hell, apparently Google is working on cell phones now.
Re:Insane (Score:5, Insightful)
Balmer: "I don't really know that anybody's proven that a random collection of people doing their own thing actually creates value."
Microsoft's Arno Edlemann: "Usually Microsoft doesn't develop products, we buy products."
It's pretty clear that MS doesn't really understand what "Innovation" really is, and how to do it. In the long term, this will bite them in the ass. Continuing their abusive and illegal behavior to maintain their de facto monopoly is their only hope of long-term survival, and they know it.
Re:Scary (Score:2, Insightful)
Re:Slasdotters Say Ballmer Is 'Insane' (Score:1, Insightful)
This doesn't make any sense. People don't say "I want to buy 200 shares of GOOG." They say "I want to buy $10,000" of it.
This is extremely obvious if you watch GOOG's level 2 data, as you'll routinely see trades for odd numbers of shares (7 shares, 13 shares, 40 shares, etc.)
The idea that there are a huge number of investors who simply don't have the $400 required to buy one share is absurdist at best.
random collection of people doing their own thing (Score:4, Insightful)
Hmmm. A random collection of people doing their own thing has saved me from ever having to run your ugly, bloated operating system!
Re:Insane (Score:3, Insightful)
Working for Google.. (Score:3, Insightful)