Google Creates Alphabet, Names CEO
Probably among the "world's most powerful technology companies", Google has overhauled its operations. It has a new publicly traded parent company called Alphabet Inc. that will bring together its disparate businesses.
Alphabet will be overseen by Google's co-founders Larry Page and Sergey Brin. It will become a subsidiary of Alphabet which has a new CEO, the top Google executive, Sundar Pichai.
"Our company is operating well today, but we think we can make it cleaner and more accountable," Page wrote in a letter included in a regulatory filing on Monday afternoon.
Larry Page posted in a google blog:
"We are excited about...
- Getting more ambitious things done.
- Taking the long-term view.
- Empowering great entrepreneurs and companies to flourish.
- Investing at the scale of the opportunities and resources we see.
- Improving the transparency and oversight of what we're doing.
- Making Google even better through greater focus.
- And hopefully...as a result of all this, improving the lives of as many people as we can.
What could be better? No wonder we are excited to get to work with everyone in the Alphabet family. Don't worry, we're still getting used to the name too!"
After the close of trading on Monday, the statement was surprising to Wall Street. Google GOOG shares went up by 6% in after-hours trading.
Hence, Alphabet is now stated to be a "conglomerate", or "collection" of companies. Its largest company will be Google, which will be reduced, removing companies that do not belong to its core Internet business.
Google will thus be part of the businesses usually associated with it, such as the Android and Chrome operating systems, YouTube and Search.
Other novel, more experimental business firms such as the 'Internet of Things' gadget maker Nest, a high-speed fiber-optic Internet project Fiber and Google's attempts to extend human life with Calico will no longer be part of Google.
Two financial firm, Google Ventures, which is a venture capital arm, and Capital, investing in private equity deals, will also be part of it.
Hence, Google is set up on the lines of Berkshire Hathaway, Warren Buffett's massive empire with a portfolio of diverse businesses specialising in everything "from real estate to underwear".
Page wants to be like Warren Buffett---overseeing a group of semi-independent leaders who are working on new businesses under the Google umbrella. "Fundamentally, we believe this allows us more management scale, as we can run things independently that aren't very related," Page said.
Google is thus aiming for various new businesses, and creating a transparent account.
"I think this sets up Google to be a much more diversified company," said longtime Google observer Danny Sullivan, founding editor of MarketingLand.com. "It certainly allows Google to expand its mission. ... It's an excellent way to have multiple companies underneath that run as independent entities."
"We will see Alphabet and we will see Google as a business line. We can do the math. That's good, more disclosure," said BGC Partners analyst Colin Gillis. "That will put to rest some of the concerns that Google is overspending in non-productive areas."
