(Bloomberg) — Google Inc. is turning to Wall Street for its next chief financial officer as the technology giant grapples with rising costs, a growing pile of cash and a need for fiscal discipline as it invests in new industries.
Ruth Porat, 57, will leave Morgan Stanley in April after more than 25 years there, the New York-based company said Tuesday in a memo to employees. Jonathan Pruzan, 46, Morgan Stanley’s co-head of global financial-institutions banking, will become the company’s new finance chief.
At Google, Porat will succeed Patrick Pichette, who announced earlier this month that he would retire. She is set to take her new post on May 26.
Investors are looking for Porat, one of the financial industry’s most senior female executives, to apply her financial acumen as Google invests to spur growth amid increased competition from Apple Inc., Facebook Inc. and Amazon.com Inc. She follows other financial-services veterans who have migrated to Silicon Valley firms, such as social-media service Twitter Inc., payments-provider Square Inc. and messaging startup Snapchat Inc.
“A dose of increased discipline could certainly serve Google well,” said Colin Gillis, an analyst with BGC Partners LP. “The key to this job is going to be the person that rationalizes the expenses of the company. Google is full of people who want to pursue big ideas.”
Google’s net income climbed 41 percent in its latest quarter from a year earlier, while Facebook’s increased 34 percent and Apple’s rose 38 percent. Google’s shares have lagged behind its rivals, dropping 0.3 percent in the year through Tuesday. Facebook’s shares meanwhile rose 33 percent, while Apple’s increased 64 percent.
Google’s shares rose 2.2 percent to close at $ 577.54 on Tuesday.
In five years as Morgan Stanley’s finance chief, Stanford University alumna Porat has helped stabilize an investment bank that almost collapsed in 2008.
“I’m delighted to be returning to my California roots and joining Google,” she said in a statement released by the Mountain View, California-based company. “Growing up in Silicon Valley, during my time at Morgan Stanley and as a member of Stanford’s board, I’ve had the opportunity to experience first-hand how tech companies can help people in their daily lives.”
Among the other Silicon Valley companies to tap Wall Street, Twitter last year named Anthony Noto, previously with Goldman Sachs Group Inc., as its CFO. Also last year, Snapchat named Credit Suisse Group AG’s Imran Khan as chief strategy officer. Square finance chief Sarah Friar previously worked at Goldman.
“I suspect at the end of the day, hiring someone with experience in a large Wall Street organization, with industry knowledge, was important” to Google, said Brian Wieser, an analyst at Pivotal Research Group LLC. “With a search that went this fast they probably had already had her in mind.”
Porat will oversee a burgeoning hoard of cash — which increased to $ 67.5 billion in the fourth quarter, according to data compiled by Bloomberg — fueled by the company’s dominance of the online advertising market. Operating expenses, which include compensation for engineering and sales staff, reached $ 6.78 billion, up 35 percent from a year earlier.
Finance chiefs at cash-rich companies like Google have to strike a balance as they seek to put tens of billions of dollars to work for shareholders in a market where regulators view large acquisitions with scrutiny. Adding to the challenge: Google holds a large portion of its cash overseas and would incur a tax hit by bringing it back to the U.S.
Google made some of its biggest acquisitions while Pichette was CFO, including Nest Labs Inc. for $ 3.2 billion, and Motorola Mobility, a $ 12.4 billion deal that resulted in much of the unit being sold off in parts. Google’s share price more than doubled during his tenure.
Chief Executive Officer Larry Page has been stepping up spending by investing in areas outside of the company’s main search-ad business, from high-speed Internet service and driverless cars to digital-payments systems and Web-linked glasses.
“We’re tremendously fortunate to have found such a creative, experienced and operationally strong executive,” Page, 41, said in Google’s statement. “I look forward to learning from Ruth as we continue to innovate.”
Investors hope Porat will give more information on how the company is performing during quarterly analysts’ calls, said Ben Schachter, an analyst at Macquarie Securities USA Inc. Stockholders hope the company will put its cash to use with some type of dividend or buybacks, he said.
“In theory, this is someone who will understand investor concerns,” Schachter said.
Porat’s move reflects the growing allure of Silicon Valley for professionals who once viewed a Wall Street investment-banking job as the pinnacle of success. More graduates are flocking to hot startups and established technology companies, while shunning the financial-services firms that some people blamed for the credit crisis.
Google has long ties to Morgan Stanley, which was the lead bank on the tech company’s 2004 initial public offering. Google resisted the idea of a traditional Wall Street IPO, opting instead for a so-called Dutch auction, made directly to investors.
Porat was a technology banker during the Internet stock boom of the late 1990s and worked closely with Morgan Stanley’s star analyst, Mary Meeker. Porat advised the U.S. Treasury Department on its rescues of Fannie Mae and Freddie Mac in September 2008. After spending a weekend trying to save Lehman Brothers Holdings Inc., she was asked to help shore up American International Group Inc., Porat said in an interview five years later.
When Morgan Stanley’s stability was threatened, the firm survived by borrowing $ 107.3 billion from the Federal Reserve in one day, selling a 20 percent stake and becoming a bank holding company. That experience shaped her time as Morgan Stanley’s CFO as she worked to stabilize the firm’s funding and convince creditors that the bank was safer than before the financial crisis.
“Over the many hundreds of hours we have spent working together, she has won my great affection and highest esteem,” Morgan Stanley CEO James Gorman wrote in the company’s memo Tuesday. “I respect her decision that now is the right time to make a change in her career.”
Porat, who is married with three sons and lives in New York, began her career at Morgan Stanley in 1987. She is vice chair of Stanford University’s board of trustees and holds the same position with the Economic Club of New York.
A breast-cancer survivor, Porat was on the phone calling clients from the delivery room during the 1992 birth of the oldest of her three sons, according to a 2010 New York Times article. Meeker, the godmother to all of Porat’s sons, told the newspaper that Porat once laid down on a boardroom table to continue a presentation to media company Ziff Davis because she had thrown out her back.
Last year, Porat spoke out against the lack of gender diversity in management, calling the number of women running U.S. companies an “embarrassment” that shows the need for new laws.
“Women are still not reaching the most senior levels of corporations,” Porat said at the time.
Under Porat, Morgan Stanley’s shares have climbed 22 percent, outpacing the 13 percent gain of Goldman Sachs. That came as Morgan Stanley more than doubled its net income to $ 3.47 billion as it relied more on revenue from its wealth management unit. Still, the firm’s return on equity was under 6 percent each of the past three years, while Goldman Sachs produced an 11 percent return on equity in each of those years.
Porat received total compensation of $ 12 million in 2013, the most recent year available, according to regulatory filings.
Pichette’s compensation fell that year to $ 5.2 million from $ 38.7 million. Google typically gives option awards and nonequity incentive-plan compensation only in even-numbered years to its top executives.