Alphabet will become a holding company – Alphabet itself won’t be a brand or be responsible for any products, it’ll just oversee Google plus all of the side projects Google has been toying with, like self-driving cars, drone delivery, and Calico, their life-extension project.
The new structure will allow management to “scale”, since the company can independently run “things that aren’t very related”.
“Our company is operating well today, but we think we can make it cleaner and more accountable”, Page wrote on Monday in a blog post.
Google announced a corporate restructuring on Monday, forming an umbrella company called Alphabet and naming a new CEO to the core business of Google. Both Page and Brin will be exclusively responsible for determining the compensation of the CEOs in each spin-off company and they’ve introduced segment reporting for Google’s Q4 results, where the internet company’s financials will be provided separately from the rest of Alphabet businesses as a whole.
Alphabet is the beginning of a new chapter for Google’s cofounders, as they step up and name Sundar Pinchai as CEO of Google, now a fully owned subsidiary of Alphabet.
Under the changes, the main Google business will be slimmed down to include search search, ads, maps, apps, YouTube and Android.
But The New York Times reports that Nest, which makes Internet-connected devices for the home; Fiber, a high-speed Internet company; Google Ventures; Google Capital; and Google X, the company’s incubator, will all be separated under Alphabet.
On the reverse, there had been concerns that the dominance of Google in its sector had reached its peak. In essence, $487 billion Alphabet will become one big corporation that owns a number of enterprises, headed by a chairman with power over all the operations. And who can forget the fledgling Google Glass or Google Plus efforts? However, the company will continue to trade on the Nasdaq under the labels GOOGL and GOOG ticker symbols.
Google co-founder Larry Page said the name Alphabet was chosen for two reasons. As Page wrote, “It is clear to us and our board that it is time for Sundar to be CEO of Google”.
The reorganization is also aimed at satisfying the concerns of Wall Street investors, who have been calling for greater transparency of Google’s overall financial health out of concern that the company has been distracted from focusing on its core businesses.
Notably, right after the announcement, shares of Google saw a spike of 5 percentage points and rising even further to 6 percent during after-hours trading.