Google CEO Larry Page announced a new operating structure to increase management scale and focus on its consolidated businesses. He also emphasized that Google is “operating well today, but they can make it cleaner and better.”
Google is now part of a new holding company called Alphabet
In a press statement on Monday, Page said they created a new holding company called Alphabet, which he will serve as CEO and Sergey Brin as President. Google will operate under Alphabet.
Page explained that Alphabet will be composed of a collection of companies including the search engine giant. He emphasized that Alphabet is about “business prospering through strong leaders and independence.
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“In general, our model is to have a strong CEO, which runs each business, with Sergey and me in service to them as needed. We will rigorously handle capital allocation and work to make sure each business is executing well. We’ll also make sure we have a great CEO for each business, and we’ll determine their compensation,” explained Page.
Additionally, Page said they plan to implement segment reporting in their financial results for the fourth quarter. The financial results of Google will be provided separately from the rest of Alphabet businesses.
Furthermore, Page said Google will be trimmed down. The business under the search engine giant that are far afield its main internet products such as Life Sciences (focused on glucose-sensing contact lens) and Calico (focused on longevity) will operate under Alphabet.
Google business will include search, ads, maps, apps, YouTube, Android, and related technical infrastructures
According to Page, the new operating structure allows “more management scale” as they run the company’s businesses independently, those that are not very related to the core products and services of the search engine giant.
Alphabet will replace Google as a publicly traded company
Alphabet will replace Google as a publicly traded company. All Google shares will automatically convert to the same number of Alphabet shares with the same rights.
The company’s two classes of shares will remain trading on NASDAQ under the symbols GOOGL and GOOG.
In a regulatory filing, the search engine giant disclosed that it would implement the holding company reorganization later this year. The current board of directors of Google will become board of directors of Alphabet following the reorganization.
Sandar Pichai will serve Google CEO
Moreover, Page emphasized that the new structure allows them to maintain tremendous focus in the extraordinary opportunities inside Google.
Sundar Pichai will serve as Google CEO. According to Page, Pichai has been saying the things he wanted to say (sometimes better) for some time now, and he’s been enjoying their work together.
Page noted that Pichai stepped up since October last year when he took the engineering and product responsibilities for the internet business of Google.
“I feel very fortunate to have someone as talented as he is to run the slightly slimmed down Google, and this frees up time for me to continue to scale our aspirations. I have been spending quite a bit of time with Sundar, helping him and the company in any way I can, and I will, of course, continue to do that,” said Page.
Page is confident that Pichai will always focus on innovation and stretching boundaries as Google continues to develop new products. He believes that Pichai deeply cares for them to continue making big steps in their core mission to organize the world’s information.
The Google co-founders are” seriously in the business of doing new things” and very excited with Alphabet. They are excited on the following objectives:
• 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
In conclusion Page said, “We liked the name Alphabet because it means a collection of letters that represent language, one of humanity’s most important innovations, and is the core of how we index with Google search! We also like that it means alpha?bet (Alpha is investment return above benchmark), which we strive for! I should add that we are not intending for this to be a big consumer brand with related products—the whole point is that Alphabet companies should have independence and develop their own brands.”
Brian Wieser, CFA of Pivotal Research, seems to be the first sell-side analyst with a reaction to the news. Brian opines:
Google is effectively changing its name to Alphabet and announcing that it will introduce a distinct reporting segment for many of its emerging ventures beginning with the fourth quarter. On balance, incremental transparency into Google’s business is positive, although we remain uncertain as to exactly how much transparency will be provided, and therefore remain cautious on the degree to which this news should be viewed favorably.