Tighter focus good for Google shareholders, but will it affect innovation, ask analysts

Google’s surprisingly good results yesterday was partly the result of the tighter focus brought in by founder Larry Page after he took over as CEO. But the sharper focus also makes it tougher for Google to maintain its glamorous reputation in the tech world, analysts warned.

Page had took over from long-time CEO Eric Schmidt in April 2011. One of his first priorities was to ‘cut the flab’ at the Internet search company.

Google had, by then, acquired a reputation as a company for which making profits was only one of the several top priorities.

The company, flush with cash from its online advertising business, was making investments into several areas where engineering and innovation could play a crucial part — notably, renewable energy, artificial intelligence, biotechnology and all sorts of online experiments and projects.

Its online portfolio of products includes a browser, video sharing and social networks, cloud-based collaboration software, Internet telephony , an e-payment solution etc..

Its offline technology investments include developing a mobile operating system (Android), a mobile manufacturing operation (Motorola), and selling own-branded netbooks and mobilephones.

The company is also supposed to have a secret laboratory called ‘Google X’ near its main office in Mountain View where engineers and scientists are hard at work on projects and gadgets that are currently more likely to be found in a science fiction movie than in corporate roadmaps.

However, since Page took over, Google has rapidly shut down several ‘ailing’ projects such as Google Wave, Buzz, Knol, Friends Connect, Health, iGoogle and Code Search.

All this, points out analysts from Pacific Crest Securities, is good for its profits — at least in the medium term — but may also affect how the company is perceived.

Thanks to its unofficial motto ‘Don’t be Evil’, its generous support for open source projects and a culture of experimentation and innovation, Google is looked up on very favorably by techies and developers.

It also ranks as one of the most sought after employers and manages to attract among the most talented engineers to its fold.

“Under the renewed leadership of Larry Page, Google has refocused on six main product areas (search, Android, Chrome, Youtube, social and ads), and it has subsequently cut many of the non-core projects on which it was working.

“Partially because of this decision and partially independent of it, Google has molted from being an “engineering” company to an “advertising” company. We expect Google to benefit financially from this focus over the medium term.

“The risk to this transition is that Google increasingly becomes a less desirable company for users (if product quality or innovation wanes) and for employees (rivals may become more interesting employers). This is especially true if Google loses in its original mission of ‘Don’t Be Evil.'” the brokerage firm notes.