Google 's investors have given Ruth Porat a line of credit—about $ 40 billion worth. That is how much the Web giant's market capitalization gained in the past week as many fixated on the former Morgan Stanley CFO, who was hired back in March to take over the top financial post at Google. And that doesn't count the 12% pop the shares enjoyed in after-hours trading on Thursday, as Google's second-quarter earnings beat expectations thanks to strength in its core advertising business.
The hope is that Ms. Porat will bring shareholder-friendly oversight to a firm not known for it. Google's stock has been stuck in a rut, averaging an 11% discount to the Nasdaq Composite this year, based on multiples of forward earnings.
In closing that gap, Ms. Porat has her work cut out for her. At Morgan Stanley, she presided over a cost-cutting program so stringent that employees were nervous about using their BlackBerrys. In Google, she has joined a Silicon Valley paragon that still provides free gourmet meals for the thousands of new hires who join its ranks each year.
Ms. Porat has been on the job for less than two months, not enough time to have much impact yet. But Google's results still showed some encouraging signs. Hiring stayed relatively low, with headcount rising just 3%. Operating expenses were 36% of total revenue versus 37% seen in the three preceding periods.
On the conference call, Ms. Porat said Google remained committed to big ideas and big growth but added that "pursuing revenue growth is not inconsistent with expense management." It is an encouraging message but not easy to pull off and yet to substantiated—which makes the stock's recent surge look premature.
Write to Dan Gallagher at dan.gallagher@wsj.com
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