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Whether or not you are at a high-profile company like Google or Eli Lilly, CFOs are under constant scrutiny from top management, the board, shareholders, analysts and regulators these days. CFOs are definitely being watched. But some admittedly deserve the attention more than others. This year’s choice of Google’s George Reyes and Eli Lilly’s Derica Rice is based not only on their financial acumen and innovation, but also for the mettle they have shown dealing with growth, crisis and the corporate version of celebrity.
By John Labate, Robert Rosenberg
There is a burden that comes with celebrity—a statement to which George Reyes, the CFO at Google Inc., can readily attest. After its unprecedented IPO in August 2004, Google began to show a little bit of its age in the fourth quarter of 2005, when its phenomenal growth began to slow ever so slightly to a mere 82%.
At a Merrill Lynch investment conference about Google’s future growth rate, Reyes was asked whether indeed the wunderkind company was losing its pop—and being an honest sort, Reyes replied that while Google would still be growing at a double-digit pace, it might not be at quite the rate it was recording earlier in its life as a public company. Even though investors are always asking for the facts, they were thrown into a tizzy and Google’s stock took a hit, dropping 12% in 20 minutes at one point.
There was also an incident at Analyst Day in which the company accidentally posted presentations on its site that contained annotated comments not intended for public consumption. As a result of these mishaps, Google was forced to issue hasty 8-K filings to reassure investors. The mistakes raised “skepticism [as to] how the company was being run” from a financial and an all-important communications perspectives, says Standard & Poor’s analyst Scott Kessler.
In fact, some even wondered whether Reyes, who had arrived at Google in 2002 to become CFO of what was then a $439.5 million company, was up to the task of running a multibillion dollar business. The 52-year-old had joined Google from ONI Systems Corp., an optical networking equipment maker, where, as the interim CFO, he assisted in the sale of the company in a $900 million all-stock transaction to Ciena Corp. in 2002. Prior to serving at ONI, Reyes spent 13 years at Sun Microsystems Inc., where he served in financial positions of increasing responsibility, including controller and treasurer, and first worked under future Google CEO Eric E. Schmidt, then CEO of Sun. Clearly, his new job dwarfed his responsibilities at his previous incarnations.
But it only takes one sensational number to wow the market right back into awe, and Google’s performance in the last two quarters has dispelled any remaining skepticism about the company—and Reyes. In the third quarter of 2006, revenues jumped 70% to $2.7 billion, while earnings nearly doubled to $733 million. Operations generated $1 billion in cash flow.
Google has been firing on all burners ever since, says S&P’s Kessler. “As much of the blame that George took for a lot of the issues that occurred,” says Kessler, “he has definitely been at the center of a lot of the good things that the company has done. You need only look at the obvious ones: growth, profitability and cash generation. For a company of its size, [those measures] are virtually unmatched right now.”