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Google taps exec close to home

The highly regarded Internet search engine appoints as chief executive its chairman, Eric Schmidt, who has served most recently in the top post at software maker Novell.

Google, one of the Internet's most highly regarded search engines, has found a new chief executive without having to look too far.

The Mountain View, Calif.-based company on Monday announced that it has tapped its chairman, Eric Schmidt, 47, for the top post. He succeeds Larry Page, one of the co-founders of Google, a search engine that has rapidly gained traction and that has a reputation for fast, efficient and targeted searches.

The appointment of Schmidt could signal a move toward a public offering, although some say not in the near future.

"Certainly (Schmidt) could be the guy that they plan to take them public, but the market isn't right this year," said Rob Enderle, research fellow at Giga Information Group, who added that he could see Google going public late in 2002.

Like many start-ups with grand plans, the privately held company is replacing its founders with more experienced top management as it grows. Starting in 1997, Schmidt served as the chief executive and chairman of software maker Novell. Although he has remained Novell's chairman, he has been serving as chairman of Google since March.

Schmidt's "strong management experience will help shape Google as we continue our growth and global expansion," Page said in a statement.

Page, the 28-year-old founding CEO, will serve as president of products, while co-founder and president Sergey Brin, 27, will serve as president of technology.

Analysts say that Schmidt is a wise selection for Google because of his technical background, respect among developers, and vast contacts in the industry. Because of his tenure at Novell and Sun Microsystems, where he served at chief technology officer before Novell, Schmidt understands technology and what it means to evangelize it in new markets.

"Google is an up-and-coming company using cutting-edge technology. Eric understands technology, and he has always been at the forefront of new technologies," Enderle said.

Google has become the search destination of choice for the technology-savvy and many others. From the beginning, Google has set itself apart from other search services by providing fast, no-nonsense search results.

The company processes 70 million search queries daily--half through its own Web site, the rest through portal partners that license its engine. More than 100 sites license Google's search engine, including Yahoo and Netcenter, a property of AOL Time Warner. It also achieved undisputed prominence when it swiped the Yahoo search engine account from Inktomi.

In the last year, the company has slowly been adding services that mimic major portals, fueling increased competition in a market hobbled by a decline in advertising spending. As Google keeps adding to its roster of available services, it will likely continue pulling traffic from established portals.

Google has added such services as white pages phone and address look-ups, mapping, Web site translation services and newsgroup access. And in the last year, it has restored a search service for newgroups through its acquisition of Deja.com. The company has also been bolstering software development for search tools such as its search toolbar.

Through such additions, analysts say that Google has been quietly and successfully building its business while others have struggled in a down market.

Success is snowballing
Financial analysts say Google's success has been snowballing because of its popularity with consumers and marketers, which despite adverse market conditions, are ever-dependent on reaching customers through a qualified search service.

"With all of this pessimism about online advertising, the search functionality is still highly valued by marketers. And companies (such as GoTo.com and Google) that focus on delivering good search results are having a lot of success," said Jordan Rohan, media analyst at Wit Soundview.

Under Schmidt's leadership, Google will likely improve the intelligence of its technology and broaden its license customers, analysts say.

"Historically, the company has been focused on licensing the technology and its own search site. This will help Google create a bigger revenue opportunity," said Jeetil Patel, senior analyst at Deutsche Bank Alex Brown. "When you hire someone like Eric you expand your overall opportunities."

Google will need additional funding to expand its business, which it is looking to do, but turning to the public markets would be a risky move, he said, adding that Schmidt is not a risk-taker.

Because Google is a private company it does not publish its finances; however, it has said that it expects to become profitable by the end of the year. It has also said that it has no immediate plans for a public offering. Its revenues are roughly split between licensing fees and advertising generated from its site. The company does not sell banner ads on it site, but it offers featured search placements for a fee through its AdWords service.

Rohan said that Google's fundamentals and prospects are stronger than those of many public companies, making it a prime candidate for a public offering.

"Every company goes through a number of stages...bringing in Schmidt is an important step to usher in the new stage of development at the company, which is somewhere between adolescence and young adulthood," Rohan said.

In the next year, "you could see a number of key strategic hires, people who Eric trusts. You could see some sort of outreach to institutional investors and the analyst community," Rohan said.

Google's venture capital backers include Kleiner Perkins Caufield & Byers and Sequoia Capital.

News.com's Paul Festa contributed to this report.