THIS WALL STREET VETERAN IS WHIPPING GOOGLE INTO SHAPE

Original Story: bloomberg.com

Google is known for multicolored bicycles, nap pods, and complimentary meals—and the free-spending ways that come with those perks. Now it wants to be known for something else: financial discipline. To whip the numbers into shape, it’s brought in Ruth Porat, an almost 30-year veteran of Wall Street.

She’s off to a good start. Porat, who joined Google as chief financial officer in May after five years as Morgan Stanley’s CFO, on July 16 unveiled second-quarter earnings and sales that topped analysts’ estimates. Impressed investors sent the shares to a record the next day, adding $65 billion to the company’s market value and more than $4 billion each to the fortunes of co-founders Larry Page and Sergey Brin. An Atlanta securities lawyer is following this story closely.

Shareholders cheered Porat, 57, with her strong finance background, as the right person to help instill more discipline at a company that’s invested in everything from driverless cars to giant barges. Now she must prove she can create efficiency without crimping the creative culture that’s helped Google dominate the online advertising market. “No one really knew her before, because there’s no reason a tech investor would really know her,” says Gene Munster, an analyst with Piper Jaffray. When she announced the second-quarter results, the idea that a Wall Street hand was whipping Google into shape “kind of went viral,” he says. “This perception of a real, hard-nosed woman who has something to prove—I think that inspires confidence.”

During the second quarter, Google’s operating expenses grew 13 percent from the same period a year ago, the slowest rate since 2013, and declined from the previous quarter. “A key focus is on the levers within our control to manage the pace of expenses while still ensuring and supporting our growth,” Porat said on a call with analysts. Her remarks also left open the possibility of Google returning cash to investors in the form of buybacks or dividends, something Wall Street has been asking about for years. At a companywide meeting following the earnings report, she talked about the importance of disciplined execution at Google even as she thanked employees for their work, according to a person familiar with the remarks. A Google spokeswoman declined to comment. A Boston investment lawyer represents clients in banking matters, project finance and private equity finance.

Porat benefited from the efforts of her predecessor, Patrick Pichette. Google’s increase in expenses started slowing during the first quarter. “Everything was probably already in motion by the time she came along,” says Sameet Sinha, an analyst with B. Riley & Co. Even so, the quarterly numbers seemed to resonate with investors, as did Porat’s résumé. “She comes with a pedigree from Morgan Stanley of doing a good job of enhancing shareholder value over her tenure there,” says Walter Price, co-manager of the AllianzGI Technology Fund, which owns shares of Google.

At Morgan Stanley, Porat helped the bank recover from its near-death experience during the financial crisis and developed a reputation as a cost-cutter who focused on boosting shareholder returns. In 2013 she laid out expense-reduction targets of $1.6 billion and last year gained approval for the bank’s biggest share buyback in four years. This year, the company more than doubled the share repurchase plan. Since the end of 2012, Morgan Stanley stock has climbed from $19 to more than $40. An Encino CPA assists companies with pension and profit-sharing plans.

Porat, a physicist’s daughter who was born in England and grew up in Silicon Valley, is no stranger to technology. As Morgan Stanley’s top Internet banker during the dot-com bubble, she advised clients such as EBay and Amazon.com and made pitches to tech startups considering going public, accompanied by her close friend Mary Meeker, the research analyst who was called “Queen of the Net.” Porat showed a passion for work, quickly diving back in after having each of her three sons and after a battle with breast cancer.

Connecting with Google shareholders will be a priority. After the earnings call, Porat, who traded pantsuits for jeans at Google, planned to begin meetings with investors in cities such as New York and Boston, making the case for Google’s prospects.

Announcing Porat’s hiring in March, Page said she would “invest in a thoughtful, disciplined way in our next generation of big bets.” She received a pay package worth more than $70 million that will vest from this year through 2019, according to a company filing. In her first months on the job, she’s been reviewing programs throughout the company. They include driverless cars, which seek to use technology to take humans out of the process; Project Loon, an effort to deliver Internet connectivity to rural and remote areas via high-altitude balloons; and Google Fiber, its broadband and TV service in select cities, according to a person familiar with the matter.

Some of those initiatives may have to be abandoned. “She might have to go and tell Larry and Sergey, ‘Here are 10 projects, pick five—let’s go with those,’” Sinha says. The Google Fiber project could get a hard look, according to Munster, because it competes with established companies such as Verizon Communications and AT&T that are focused on building and delivering broadband and TV services.

Lifting the share price is crucial for Google, where many employees get much of their compensation in stock and can easily jump to a rival such as Apple. In the year before Porat was named to the job, the shares had fallen 4.5 percent while the Nasdaq Composite Index had climbed 17 percent. “Retention is the biggest challenge,” Munster says.

Google’s issues go beyond cost control. They include a threat to its core business of selling ads next to search results. As consumers access the Web via smartphones instead of desktop PCs, they’re increasingly likely to tap on an app rather than open a browser.

At the same time, Google faces stronger competition in online commerce from Amazon, which is grabbing more users who skip comparison shopping on Google and buy from the retailer. Also, Facebook, growing more quickly than Google, is competing for advertising and is a threat to Google’s YouTube business as it pushes video options to its users. “It was a good quarter, but it doesn’t mean there aren’t a lot of the same structural and competitive concerns,” says Ben Schachter, an analyst at Macquarie Securities.

AOL and Huffington Post Finally Reporting Revenue

Story first appeared on USA Today -

Two years after it acquired the Huffington Post, AOL still faces challenges in courting consumers and advertisers — but it is beginning to show progress.

While scheduling a business lunch in late 2010, Huffington Post co-founder Arianna Huffington and AOL CEO Tim Armstrong each had a question for the other.

Huffington, who was hosting the meal at her home, asked whether there was anything he didn't eat. (The answer: mushrooms.)

Armstrong asked whether he could bring along his chief financial officer. That made the AOL honcho's intentions clear, and he swiftly expressed them when the group gathered.

"Up front, before the first course was served, he said he wanted to buy The Huffington Post," Huffington said in an interview at her New York office this week.

Soon after that meeting — during halftime at Super Bowl XLV in Dallas — the deal was signed. AOL paid $315 million for the site.

Together, the companies would create "a digital destination that delivers unmatched experiences for both consumers and advertisers," Armstrong said when the deal was announced.

Two years after that acquisition, and nearly four years after Armstrong took the helm, AOL still faces challenges in courting consumers and advertisers. But it is finally showing progress.

On Friday, AOL reported its first increase in quarterly revenue in eight years. Revenue rose 4%, to $599 million, in the fourth quarter. Net income, bolstered by a $16.8 million gain from the sale of overseas assets, was $35.7 million, or 41 cents a share. In 2011, AOL earned $22.8 million, or 23 cents a share.

"We have walked through the valley of the turnaround and have gotten to growth," Armstrong said during Friday's earnings call.

Managing an evolution

Created as a Web portal and Internet access provider, AOL today has evolved into an ad-supported technology and media giant.

To achieve its goals, AOL cut costs, while ramping up consumer- and advertiser-friendly content such as video and apps. Ad revenue for the company hit $411 million in the fourth quarter, up 13% from the same period in 2011. Full-year ad revenue was up 2.8% to $1.3 billion.

The Huffington Post acquisition has helped power its growth.

Across AOL's properties, the level of monthly U.S. unique visitors was 110 million in December, up from 107 million in December 2011, but down from the 112 million in December 2010, according to tracker comScore. The Huffington Post's U.S. monthly unique viewership has steadily grown — to 46 million in December from 25 million two years earlier, according to comScore figures provided by Huffington Post.

AOL doesn't break out profit on The Huffington Post or other media divisions, but for the first time on Friday, it disclosed results of a "brand group" category that includes The Huffington Post, AOL.com, TechCrunch, local-news provider Patch and other content-focused assets.

That group's revenue grew 4% to $213 million for the fourth quarter. Adjusted operating income before depreciation and amortization was down 34% to $8.8 million for the quarter. The drop-off was primarily the result of increased investment in editorial staff and sales representatives and higher marketing expenses, AOL said.

Despite its recent revenue growth, AOL still faces hurdles. It lost share in the overall U.S. digital ad market in recent years, according to industry tracker eMarketer. AOL had a 2.5% share of all U.S. digital ad revenue in 2012, down from 2.8% in 2011 and 3.3% in 2010.

U.S. digital ad spending grew 14.9% in the fourth quarter to $10.58 billion, according to eMarketer estimates. Google has the biggest share — with more than 41% of all digital ad revenue in the U.S. Yahoo has the second-biggest share.

A well-known personality

Like other top media executives, Arianna Huffington is a frequent attendee at advertising and technology events. But the Huffington Post Media Group editor-in-chief is well-known outside the industry. She is present at major political outings and featured in society pages. Her Greek accent and outgoing personality are so familiar that she is sometimes impersonated on NBC's Saturday Night Live.

Unlike AOL, which had a "stodgy and old" image in recent years, Huffington and the company she co-founded are more current and cutting edge, says Robert Passikoff, president of brand loyalty consulting firm Brand Keys.

Passikoff likens AOL to "a kid in high school who isn't cool anymore." But by aligning with The Huffington Post, the AOL brand acquires some rub-off hipness. "There is a halo effect," he says.

The Huffington Post brand, as well as sibling unit TechCrunch, also tend to attract more tech-savvy users than the traditional AOL brand, notes Ben Schachter, an analyst at Macquarie Securities.

TechCunch and The Huffington Post help AOL draw consumers who aren't tethered to laptops, but use mobile devices such as tablets and smartphones, and will view alternative ad-supported content such as videos, he says.

Armstrong told USA TODAY that The Huffington Post's strong brand awareness, as well as its focus on innovation, gives Huffington Post "game-changing global potential."

Huffington: 'Best of both worlds'

Asked if she would want to buy her company back, Huffington says that "there is no reason to even contemplate anything like that."

"We have the best of both worlds," she adds. "We are a stand-alone entity within a great parent company that is very supportive of our big dreams."

But for The Huffington Post to keep its relevancy, she says, "it has to keep growing and evolving and engaging readers in new ways."

To that end, Huffington Post is:

• Extending global reach. Last year, The Huffington Post launched six international editions. It's now in the UK, Canada, France, Spain and Italy. Next up are areas in Germany, Africa and Asia. "We're going to go from international to global," says Huffington Post Media Group CEO Jimmy Maymann.

• Adding more videos. Video network Huff Post Live launched in August. It provides 12 hours of content, such as interviews with well-known personalities, on weekdays.

• Going mobile. Last year, The Huffington Post introduced an iPad app for HuffPost Live and an app for an iPad magazine. It also launched a wellness-focused "GPS for the Soul" iPhone app this year.

• Increasing lifestyle content: The site will bolster its coverage of personal topics such as divorce, weddings, books and travel.