Alphabet, the parent company of Google, has made an exciting announcement that has caught the attention of Wall Street. Ruth Porat, the finance chief of Alphabet, will be assuming the newly-created position of president and chief investment officer of Alphabet and Google, starting from September 1. While she continues to serve as the chief financial officer for the company until 2024 and leads long-term planning, a successor will be chosen for her current role.
Porat’s new responsibilities also include overseeing investments in Alphabet’s “Other Bets” portfolio. This shift in her role positions her in a favorable position to make significant changes to this costly segment. The “Other Bets” portfolio consists of projects such as Waymo, the self-driving vehicle operation. In the second quarter, this portfolio reported an operating loss of $813 million, a decrease from $1.34 billion in the same quarter of the previous year.
Concerns regarding the spending of the “Other Bets” portfolio have troubled investors for some time now. Last year, TCI Fund Management, an activist hedge fund, expressed its concerns in a letter to Sundar Pichai, CEO of Alphabet, which called for cost-cutting measures and other actions.
Thomas Champion, an analyst at Piper Sandler, mentioned in an email that Porat’s new role allows her to closely evaluate the portfolio. He highlighted that the segment currently generates an annual profit loss of $4.5 billion. It is crucial to assess whether these investments will yield returns and, if so, when they can be expected. Champion expressed confidence in Porat’s ability to address these investment challenges and analyze the company’s capital allocation strategy more effectively.
With this strategic move, Alphabet aims to optimize its investment decisions and navigate the complex landscape of its portfolio.
Alphabet CFO Ruth Porat Takes on New CIO/President Role
Investors have shown their approval for Alphabet’s recent announcement of CFO Ruth Porat taking on an expanded role as CIO/President. This news comes in conjunction with the company’s better-than-expected second-quarter results, which led to a 5.8% increase in Alphabet shares, reaching $129.25 each during Wednesday afternoon trading.
Porat, who assumed the position of CFO in 2015 after working at Morgan Stanley, has established herself as a well-respected figure on Wall Street. She consistently appears on the annual list of the 100 Most Influential Women in U.S. Finance, and her track record of making the firm “investor friendly” has gained her popularity among investors.
According to William Blair analyst Ralph Schackart, Porat’s new role will have a positive impact on Alphabet. He believes that her expertise in strategic financial management will enable her to effectively navigate the challenge of deploying over $100 billion in cash. With Alphabet’s focus on becoming a Generative AI leader, this new responsibility is particularly timely. Schackart anticipates significant potential for shareholder value creation and suggests that investors should be excited about this announcement.
Overall, Porat’s elevation to the role of CIO/President not only expands her mandate but also presents an opportunity for her to address long-term projects. Her proven financial expertise and strong investor communication skills position her well for success in her new role.