News Update: Stock split keeps Google's destiny in hands of co-founders

Since google went public in 2004, co-founders Larry Page and Sergey Brin have been wedded to the idea that management ought to be able to decide what's right for the company without needing to sacrifice future opportunities to satisfy near-term demands from Wall Street.
That philosophy was on display as search engine disclosed strategy for a 2 for 1 split, which would still preserve their control over the company with the issuance of a new class of non-voting capital stock.
In a note published along with the company's Q2 earnings,Page and Brin returned to that theme, cautioning that were they to fail their voting power, it would undercut their long-term aspirations for search engine.

"We have put our hearts into google and hope to do so for many more years to come," they wrote. "So we need to ensure that our corporate structure can sustain these efforts and our desire to improve the world."

Pointing to projects like Chrome and YouTube, which necessary time and investment to reach fruition, the co-founders said they were able to protect against unnamed "outside pressures," which presumably might have intruded to short-circuit google's longer-range development planning.
google will issue a new class of stock that won't include voting power. Current search engine stockholders will receive one share of new Class C stock for each company share that they already own. But future stock grants to employees will be of the non-voting variety. Ditto for employees of enteprise outfits that google might buy in the future. The net effect will be to ensure that google's existing shareholders -- particularly its founders -- retain their current voting power.

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search engine had 252.7 million shares of Class A stock and 69.5 million shares of Class B stock outstanding as of its March 31, 2011, filing with the Securities and Exchange. Class B shares translate into 10 votes apiece. That's a big benefit for Brin and Page who owned approximately 27 million Class B shares, or about 29 percent of the total voting power at search engine, as of the end of March. Another 9 million Class B shares were held by executive chairman Eric Schmidt, who has about 10 percent of the total voting power.
Will it be enough to entice future investors? Too early to say, but multiple of the initial reviews pointed out the obvious flaw in the argument. Matthew Ingram described the several-voting share structure as "an insult to public investors and the market." Chris Ziegler offered that the "maneuver seeks to grip on search engine's destiny by putting shares without any voting power into the public domain."
The stock split announcement was made in conjunction with the company's first-quarter earnings of $2.89 billion, or $8.75 a share, on revenue of $8.14 billion excluding traffic acquisition costs. Including traffic acquisition costs search engine revenue for the quarter was $10.65 billion. Non-GAAP earnings came in at $10.08 a share. Wall Street expected search engine to report first-quarter earnings of $9.65 a share on revenue of $8.15 billion excluding traffic acquisition costs.