As Google stock lags, high hopes for new CFO Ruth Porat

SAN FRANCISCO — When Google talks, Wall Street listens.

This time it will be really listening.

Ruth Porat will address investors for the first time as Google's new finance chief Thursday afternoon during the Internet giant's second-quarter earnings call — and they will hang onto her every word.

"We think the most notable upcoming catalyst for the stock will be the company's new CFO, Ruth Porat, and her comments next week," Rosenblatt Securities analyst Martin Pyykkonen said in a research report this week.

Expectations could not be higher for 57-year-old Porat, a banking veteran who has swapped coasts to be the Wall Street emissary for Google, which for years has frustrated shareholders by withholding key details about its growing collection of digital businesses.

One of the nation's most powerful banking executives, Porat served for five years as chief financial officer of Morgan Stanley. She succeeds Google's longtime CFO Patrick Pichette, who announced in March he's retiring to spend more time with his family.

Her appointment is broadly seen as an effort to restore confidence in investors. Over 12 months, Google (GOOG) shares have slipped 4%, underperforming the S&P 500 (up 7%), Facebook FB (up 34%), Amazon AMZN (up 30%) and Apple AAPL (up 33%).

Porat is already getting plenty of unsolicited advice from Wall Street analysts — even her former firm Morgan Stanley — on how she could improve Google's stock performance through greater transparency and communication.

Goldman Sachs is urging Porat to break out how much revenue Google generates from YouTube and other key digital businesses. If Google helped analysts better assess the performance and long-term competitive positioning of these businesses, Morgan Stanley predicts Google could add more than $100 to its stock price. And analysts across the board are pressing Google to share some of its $65 billion cash stockpile with shareholders, perhaps with a stock buyback or a dividend.

While Google usually thumbs its nose at the street's demands, analysts say the Internet giant needs to goose the stock as the war for top talent escalates in Silicon Valley, where the coin of the realm is stock options.

"There is a misunderstanding about the company and (Google CEO) Larry Page not thinking about money and the stock. They very much do, if for no other reason than they need the stock to work to fund the things they want to do," Macquarie analyst Ben Schachter said. "Here you have someone who is both of the culture of Wall Street and Silicon Valley. Will she know how to communicate with Wall Street in a way that is beneficial to the stock?"

So far Porat is not tipping her hand. She declined an interview request from USA TODAY.

But in Porat, Google has someone known on Wall Street and in Washington for her skilled handling of regulators and investors. She helped Morgan Stanley recover from the financial crisis and advised the Treasury Department on the bailout of Fannie Mae and Freddie Mac and the Federal Reserve on rescuing insurer American International Group.

And Porat is no stranger to Silicon Valley. She grew up here and studied economics at Stanford, where her father was an engineer at the Stanford Linear Accelerator and where she now serves on the board of trustees. And she was a technology banker during the Internet stock boom of the late 1990s, taking public some big names names including Priceline.

"Given her background and relationships and her deep understanding of investors, hopefully she will be tapped to be more broadly involved in things like strategy and bigger picture thinking and decisions the company is making," said S&P Capital IQ analyst Scott Kessler.

There is precedent for that. Porat took on a broader role at Morgan Stanley in the messy aftermath of the financial crisis.

"So much of what we do is intertwined with strategically where should the institution go," Porat said of CFOs during an interview last year at the Yale School of Management.

Google can tap that wealth of experience now that it is a much more mature technology company navigating increasingly choppy and complex dealings with investors, policymakers and regulators.

Slipping ad prices, slowing growth in its search advertising business and growing competition from Facebook and other competitors have weighed on the stock. Increased spending and speculative investments in new technologies have alarmed investors. Financial results have failed to meet Wall Street consensus for five consecutive quarters. And Google is under investigation in Europe for how it wields its monopoly power in search, with another investigation into its mobile software Android looming.

"Understandably shareholders are wondering about opportunities, execution, competition and valuation," Kessler said. "At that stage you need to start being a little more shareholder oriented."

That would be a significant shift for Google. Its founders, Page and Sergey Brin, exert ironclad control over the company. Google does not provide quarterly earnings guidance — saying publicly what companies expect profits to be — insisting it will not succumb to outside pressures to meet quarterly market expectations.

Yet there are signs Google may now be willing to make some concessions while it continues to uses money from its lucrative search business to chase the digital businesses of the future.

TRADING PINSTRIPES FOR HOODIES

It's that ambition that seems to have attracted Porat. In a statement released by Google in March, Porat said she wanted to experience firsthand "how tech companies can help people in their daily lives."

Until now, Porat had spent her career on Wall Street and mostly with one firm.

Armed with a pair of master's degrees, Porat joined Morgan Stanley in 1987, arriving just before the stock market crash.

She quit Morgan Stanley briefly in 1993 to follow banker Robert Greenhill to Smith Barney, but returned three years later, albeit with a demotion. In 2000, she moved to London to lead Morgan Stanley's technology banking team there.

Porat was diagnosed with breast cancer a year later and moved back to the USA but did not slow her pace. "For me, going to work meant that I was in control of my life," she said in an interview.

By all accounts, Porat owes much of her success to her tireless dedication to work.

During the birth of her first son in 1992, she made client calls from the delivery room, according to a profile in The New York Times. And, after throwing her back out during a meeting with the media company Ziff Davis, Porat laid down on the boardroom table to make her presentation.

When the tech bubble collapsed, Porat reinvented herself as a financial services banker. When the banking industry nearly collapsed in 2008, Porat took on high-profile bailout assignments that put her in the running for U.S. Deputy Treasury Secretary.

In 2010, she was promoted to CFO of Morgan Stanley, making her one of the top women executives on Wall Street.

This April, during her final earnings call at Morgan Stanley, Chairman and CEO James Gorman credited Porat with getting "this firm back from the depths of the financial crisis."

A NEW ADVOCATE FOR WOMEN IN SILICON VALLEY

Porat's tenure on Wall Street is remarkable in another respect. The banking industry is famous for crushing the aspirations of women who climbed to the top, especially during the financial crisis.

She won't find gender balance in Silicon Valley, either.

Porat is joining Google at a time of heightened scrutiny of the lack of women and minorities at tech companies, particularly in leadership positions. At Google, Porat is the highest-ranking woman executive ever.

Google, like other major tech companies, is dominated by white and Asian men. Porat will have the company of other prominent women tech CFOs, including Microsoft's Amy Hood, Cisco's Kelly Kramer and Oracle's Safra Catz, who is also co-CEO.

Porat told Politico last year she is used to being one of the only women in the room, whether in economic classes at Stanford, at business school or on Wall Street. And she does not mince words about the paucity of women in leadership in corporate America, calling it an "embarrassment."

"This is not the shortcoming of women," Porat said last year in remarks at the Japan Society in New York. "We're talented and smart."

She recalled how years later she was shown early performance reviews that predicted she would not have the stamina to rise above the junior ranks at Morgan Stanley.

Now Porat has left her perch atop Wall Street to become one of the most powerful women in Silicon Valley with one of the largest paychecks. She's set to receive a cash and stock award worth more than $70 million.

"I'm quite confident I outlasted the man who questioned my stamina," Porat said.