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Did Alphabet's CEO Shuffle Come As A Surprise?

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Did Alphabet's CEO Shuffle Come As A Surprise?

Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL) will now be led by Sundar Pichai, who will split his duties along with being CEO of Google.

Google co-founders Sergey Brin and Larry Page took another step back from day-to-day management of the company, but Pichai's promotion is unlikely to result in any material near-tame changes.

Bank of America analyst Justin Post said the CEO transition also marks another step in Alphabet's evolution to become more "Street friendly" with recent steps including a larger share buyback program and more guidance from the CFO.

There are bigger issues for investors to follow in 2020, including new advertising formats, the Cloud business and a vision what YouTube will look like down the road.

See Also: Alphabet CEO Larry Page To Step Down; Google CEO Sundar Pichai Will Assume Dual Roles

No Surprise

Brin and Page haven't been very involved in Alphabet's day-to-day management for quite some time, Recode editor-at-large Kara Swisher said on CNBC. By contrast, Pichai has been running the Google unit which comprises the bulk of the company.

"It really is important to have a single leader at the top and sort of a floating leader," Swisher said.

Pichai's promotion is merely giving him the title for a job he has been "doing anyways," Swisher said. As such, the announcement doesn't come as a surprise and Pichai is a good fit as "someone who bleeds Google."

Loup Ventures Gene Munster agrees with Swisher. The former research analyst said on CNBC that Pinchai has been in a "delegate and elevate role" the past few years.

Cloud, Cloud, Cloud

Pinchai's promotion will likely take a bit of a backseat to more pressing questions investors have, most notably what's next for the company, Wedbush's Daniel Ives said on CNBC. If there is one area for Pinchai to focus on more than others, it would be in the Cloud business as the company is "miles behind" rivals.

Ives said Pichai is likely to "double down" on the Cloud business, including overseeing acquisitions. Alphabet may not be able to catch up to industry titans Amazon.com, Inc. (NASDAQ: AMZN) and Microsoft Corporation (NASDAQ: MSFT), but it doesn't have to. Total cloud spend will total around $700 billion over the next three years so a revamped focus implies an incremental $20 to $30 billion opportunity.

Alphabet's stock traded higher by 2% at time of publication.

Latest Ratings for GOOG

DateFirmActionFromTo
Dec 2019Initiates Coverage OnOverweight
Oct 2019MaintainsBuy
Oct 2019MaintainsBuy

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