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TechAlphabet

Why investors love Alphabet’s new CFO

By
Erin Griffith
Erin Griffith
By
Erin Griffith
Erin Griffith
October 23, 2015, 11:54 AM ET
Ruth Porat became one of Wall Street's top women when she took Morgan Stanley's CFO spot shortly after the crisis. This year, her influence ticked upward with Morgan Stanley's deal to buy out the rest of Citigroup's stake in their brokerage joint venture. Porat has said that the deal will help boost the firm's deposits from $82 billion to $138 billion by mid-2005. Well respected both on Wall Street and off, Porat was reportedly a top candidate for the No. 2 job at the Treasury Department before she withdrew her name from consideration.
Ruth Porat became one of Wall Street's top women when she took Morgan Stanley's CFO spot shortly after the crisis. This year, her influence ticked upward with Morgan Stanley's deal to buy out the rest of Citigroup's stake in their brokerage joint venture. Porat has said that the deal will help boost the firm's deposits from $82 billion to $138 billion by mid-2005. Well respected both on Wall Street and off, Porat was reportedly a top candidate for the No. 2 job at the Treasury Department before she withdrew her name from consideration. Photograph by Jin Lee — Bloomberg/Getty Images

Ruth Porat has only been CFO of Google parent company Alphabet (GOOG) for seven months, but she’s already a huge hit with Wall Street. The former Morgan Stanley CFO is bringing transparency to the $489 billion (market cap) Silicon Valley giant, and investors are responding positively to the change. (Alphabet stock is up 7% this morning.)

Porat possesses a rare ability to do something most tech executives, Wall Streeters, and CFOs are horrible at: speak in plain English. On Alphabet’s third quarter earnings call Thursday, she answered analyst questions with actual substance, a refreshing change from the typical corporate-speak dodges that plague earnings calls.

As I noted Thursday, Porat has overseen the reorganization of Google to Alphabet, which brings a dose of much-needed transparency to the company. Starting next quarter, Alphabet will separate the way it reports revenue and earnings into two categories: Google, and “Other Bets.” The Google segment is the company’s advertising business. It makes up the vast majority of Alphabet’s revenue and profits. “Other Bets” includes a disparate mix of hardware companies, investment arms, life sciences businesses, and X, its experimental lab for innovation.

The separate reporting will give investors a clearer idea of exactly how much money Google is investing in its “moonshot” projects, and eventually, how much money they contribute to the bottom line. When investors see crazy, expensive-looking projects like self-driving cars, Internet balloons and robots, they question Alphabet’s fiscal responsibility. That’s where Porat’s Wall Street sensibility comes in. “The move to Alphabet gives us the opportunity to provide some greater insight, so you can see the investments we’re doing,” Porat said Thursday on the call.

Beyond increased transparency, Porat is behind Alphabet’s first-ever share buyback, a $5.1 billion purchase. It’s a tiny amount considering the $72 billion in cash on Alphabet’s balance sheet, but it’s a simple way to garner Alphabet some goodwill with investors. (Buybacks reduce the number of shares outstanding, which increases a company’s earnings per share.)

Still, investors should not get too comfortable. Touting Google’s big plans and warning investors of future investments, Porat noted, “incrementalism in technology leads to irrelevance.” She also said that despite the investment and new structure, Google is still open to large acquisitions. Three of Google’s six products with more than a billion users have come through mergers and acquisitions, she said.

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About the Author
By Erin Griffith
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