Google Inc (NASDAQ:GOOGL) has tapped Morgan Stanley (NYSE:MS)’s CFO, Ruth Porat, as its new CFO. The hiring of Porat is seen as a step by Google to try and cut runaway costs. It is unclear what Google intends to pay Porat, but for the three years to 2013, the total compensation of Google’s outgoing CFO was twice that of Porat at Morgan Stanley.
Why are analyst so optimistic about GOOGL?
Google Inc (NASDAQ:GOOGL) is investing in new projects such as autonomous cars, augmented reality and Internet infrastructure. The company is looking to new investments to reduce its reliance on ad revenue. However, as the Internet giant pursues new revenue opportunities, costs have also been on the rise, which worries shareholders and analysts.
Reducing expenses
Porat has been credited for driving major cost-cutting efforts at Morgan Stanley. She helped the bank reduce its expenses to 29% of revenue in 2014, down from 34% of revenue in 2012. On the other hand, Google Inc (NASDAQ:GOOGL)’s costs have increased, with total expenses jumping 23.4% last year. According to Colin Gillis of BGC Partners, Google requires someone who can help it push back against runaway costs and expenses. Gillis further noted that investors hope that Porat will be the right person to help Google rein in costs.
Support acquisition
The hiring of Porat has also been seen as a sign that Google could increase its acquisitions as it seeks to grow in new areas.
Compensation disparity
As CFO at Morgan Stanley, Porta’s compensation in the three years to 2013 was $29.6 million. That was just half of $62.2 million that Google Inc (NASDAQ:GOOGL)’s outgoing CFO, Patrick Pichette, took home in the same period. Google has not disclosed what it plans to pay Porat as she moves from Wall Street to Silicon Valley.
Shifting from Wall Street to Silicon Valley
Porat will formally join Google Inc (NASDAQ:GOOGL) on May 26. In the move to Google, Porat joins the growing list of Wall Street bankers that are shifting from the heavily regulated finance sector to technology industry. Others that have abandoned Wall Street work for technology companies include Anthony Noto and Mary Meeker. Noto joined Twitter Inc (NYSE:TWTR) from Goldman Sachs Group Inc (NYSE:GS) while Meeker joined Kleiner Perkins from Morgan Stanley.
