Ballmer Says Google's Growth Is 'Insane'

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."

Comments

Let the chair throwing commence

[Vengeance]

As I translate Steve's remarks:

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'

[AKAImBatman]

AKAImBatman spoke to Slashdot this week, commenting that Microsoft's CEO is 'insane,' and the company has few successful businesses outside of Windows and Office. He referred to Balmer's stage antics as 'cute.' 'I don't really know that yelling "Developers" and doing your own thing on the stage creates value.' AKAImBatman went on complain that, in general, competition for good stage presenters has become an issue. Even companies like SCO are looking for skilled showmen, making the HR fight between the two companies that much more challenging.

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:Slasdotters Say Ballmer Is 'Insane'

[daeg]

Investors have a lot riding on the fact that Google will eventually return more than just a very high stock price for them. While stock prices make money short term, the base of investing is long term returns. I have a feeling that, in a few years' time, if Google isn't returning anything, their stock could face a major drop.

Something that is scary, though, is that Google has a very unique position in the marketplace. They know trends before they are public trends. With their stats program that is popular with startups, they can see new sites and new ideas before they get big. That is tremendous power, in both terms of capital (buying out early), and could be used for good of "evil" very easily. Imagine if they started selling that data to investment groups. "Based on search queries it looks like MSFT might face a major wave of backlash, you should short their stock." They are in position to even influence the global market through Google News and search results ranking.

Re:Slasdotters Say Ballmer Is 'Insane'

[UnknowingFool]

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.

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.)

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.

Having a bunch of programmers sitting around does not accomplish anything.

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.

Re:Slasdotters Say Ballmer Is 'Insane'

[rockmuelle]

"Google does do only one thing, and they do it well!"

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

Re:Slasdotters Say Ballmer Is 'Insane'

[um... Lucas]

When was the last time Microsoft's stock was over $100, let alone $400? Ballmer's more envious than anything -- he keeps wondering why no one at Google is reading the résumés he keeps sending.

No offense, but don't start investing.

A companies value is NOT reflected by the share price alone. It's the share price TIMES the number of outstanding shares.

Quick math:

Googles market cap is 137.43 billion; share price is 441.96; it has approximately 311 million shares circulating.

Microsofts market cap is 267.23 billion; share price is 27.31; it has appromately 9.7 billion shares circulating.

It's been argued that one of the main reasons that Google trades at such a high P/E ratio is because they've restricted the number of shares circulating... Like, if they split the stock to match the shares outstanding of other companies, there'd be so many shares circulating that the price would drop, not only just because there'd be more shares as a result of the splits, but because there would actually enough to fill the demand.

Not trully related to the discussion, but related to your comment...

Re:Slasdotters Say Ballmer Is 'Insane'

[The Mayor]

Yep. You hit it right on the head. Google isn't a search/data organization company. They are an advertising company. All of their products are designed to do one thing: sell advertisements. In that business model, they have found a way to compete very aggresively with other software companies because most software companies rely upon sales of software for their income. With Google's business model, they care only about selling advertisements, so they can give their software away for free. What does that mean? Nobody can beat them on a cost basis. Other companies can produce higher quality (or more feature-rich, in MSFT's case) software, but nobody can beat them on cost. Over time, Google can continue to improve their apps until they approach the quality of traditional software. What this means is that Google can chip away, and eventually eclipse, other software manufacturers in terms of quality and features, but nobody can eclipse Google on cost.

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

Jealous much?

[GeckoX]

Steve, your showing off your true traits and motivations again.

If you really felt this way, you'd sit back and wait for Google to implode, and then hire all the best ex-google-ites for well under what they're being paid now.

But you're making such a fuss about it...whining really.

Steve here's a hint for you, it's called competition. Look it up some time.

Hedge funds

[mattbelcher]

It is true. I took a job with an automated trading firm over Google. Partly I wanted to work for a smaller company. Google's dream 20% time looked like a myth when I actually interviewed there (none of my interviewers used their time because they had too much work to do on their normal projects). Also, there's something satisfying about directly measuring the success of your software in dollars. If it makes money, you run it.

Next week news:

[Vexorian]

Novell agrees that google's growth is insane.

Google is insane?

[Trekologer]

This is coming from the guy who ran around a stage screaming and flapping his arms about.

Microsoft jokes aside,

[LibertineR]

Ballmer is completely correct.

Disclaimer: I worked for Microsoft

Google's approach to growth right now resembles something like a gold rush, assuming that they know where the gold really is. I dont think they do exactly, but are hedging their bets on a number of ideas. The search engine makes money, but Google knows that they will need to do more, and I hope the phone rumors are true, but even so, just gathering a lot of great programmers together under one unbrella does not guarantee innovation.

I think Microsoft proved that good programmers dont necessarily make great programs. Every one of Google's businesses are cases of doing someone else's idea better. Cant wait to see what is coming, but for the moment, I cant see the fault in Ballmer's logic.

rebuttal

[psbrogna]

'I don't really know that anybody's proven that a random collection of people doing their own thing actually creates value."

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.

Straw Men

[jazman_777]

'I don't really know that anybody's proven that a random collection of people doing their own thing actually creates value.'

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?

Robotic, cookie cutter hiring

[DrDitto]

Well I'm a PhD student in Computer Engineering at a highly ranked university. I don't claim to be "smart". However I work hard, I can hold my own when it comes to coding, and I have professional software engineering experience before I started grad. school.

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.