Doubts Over Alphabet's Future As Google Hangs Up Project Ara

Shortly after Google announced that they would be shelving plans to move forward with their modular smartphone venture also known as Project Ara, Jillian D'Onfro writing for Business Insider echoed criticism of Larry Page's direction for and handling of parent company Alphabet. The transition from Google to Alphabet was a way for Page to separate core Google operations from "other bets," projects like Ara that could flop at any moment. Unfortunately, it's been looking like nothing but flops for those bets recently, leading D'Onfro and others to deem the Alphabet transition a "mess" among other things.

Flailing or Just Cleaning House?

The Verge recently published an article titled "Alphabet and Google's Very Bad No Good Summer" which asks the question: is alphabet flailing or just cleaning house? The piece makes good mention that Google "famously kills products and projects with little notice in so-called 'Spring Cleanings,'" meaning that it's easy to piece together your own story and assume the worst. Nevertheless, author Dieter Bohn's listed Alphabet's biggest recent failed and tumultuous projects, mentioning that it "doesn't feel like spring cleaning. It feels like a hot summer mess." Here are a few of those projects:

• Fiber: the big news surrounding Fiber came on August 25th, with The Information reporting that Google Fiber's chief, Craig Barratt, has been ordered to halve the size of his department. This in conjunction with reports that Google Fiber is switching to wireless technology has some on edge–but some solace does come from the recent legal win against AT&T in Nashville which will make delivering broadband easier for new entrants like Google Fiber.
• Nest: After acquiring Nest in 2014, reports of turmoil and an exodus of staffers, including former CEO Tony Fadell, Alphabet has failed to make a dent in the Internet of Things or home automation front. Most recently, Google made the decision to absorb Nest developers amidst reports of missed sales targets and tensions with Alphabet management.
• Self Driving Cars: Last month, Google's self-driving car project lost three executives, including CTO and technical lead Chris Urmson. While Bohn points out that former Googlers have left to form a spin-off self-driving trucking service, Otto, and that it must sting for Uber to partner with them–but the whole industry has been laden with problems, so it's hard to say that Google isn't suffering the same woes as everybody else.
• Alphabet X: On August 29th, Recode reported that "several people who have recently left X and those close to it describe the Alphabet unit as sputtering, unable to bring projects to life." The problems described aren't technical, but rather managerial and wrapped in red tape, meaning that projects such as balloon internet, drones, robotics, and others are "rudderless" and trapped in development. We do have to remember, however, that 'the moonshot' factory is designed to try and scrap ideas.

Bohn goes on to list other, legitimately concerning losses and halts in production, including aforementioned Project Ara, the Chromebook Pixel, and Google's new chat app that still hasn't delivered.

Still Doing Well On the Market

Despite all of this, Google (GOOG) is still doing well on the market, with Head Trader & Strategist at The Steady Trader, Serge Berger, claiming that the company is on breakout watch, sitting on a launchpad and ready to blow. Sure, from an investor's standpoint, all of these trials and errors might not look like good things for the average company–but we have to remember that Google isn't your average company. Perhaps these shifting tides simply show that Google is finally all grown up, able to provide core services while still tinkering with innovative projects on the side. Maybe CFO Porat is providing that 'adult supervision' that Larry Page apparently needs, while still letting him play with his moonshot toys.

Ruth Porat may be the catalyst that is helping to change Alphabet from the inside out, with a departure from predecessor Patrick Pichette's "innovation and pushing the envelope" attitude, and replacing it with a "tight governance" and "discipline in expense management" mantras. Fool.com predicts that more disciplined spending is going to be showing up in future reports, and that as Google tightens its spending belt, the company will still be seeing increased earnings.

...But What Does This All Mean?

The real question is whether or not Google is still going to be able to compete with innovations. Sure, Google retains dominance as the main search engine of choice for most people, Android is widely in use, as are Gmail and Google Apps, and things will likely remain that way. Long-term investors aren't worried about core essentials, because they're not going anywhere, and this is what puts them at odds with the average public and short-term investors. Those excited about Google Life Science's foray into needleless diabetes tech or their solar powered contact lenses or any of their other crazy offerings are generally investing interest, not money, into Google.

Of course, changes in the Google that the layman knows will inevitably precipitate change in the Google that investors know as well. Will Google tightening the belt and the purse strings during a period of unprecedented exodus actually spell doom for company? Or is the Google we all know and love just growing up? Only time will tell.