G Is for Google, A Is for…
Search behemoth Google will reorganize under a new holding company dubbed Alphabet that will be run by co-founders Larry Page and Sergey Brin as CEO and president, respectively. Sundar Pichai, currently senior vice president of products for Google, will become CEO of the search giant.
Alphabet, according to a blog posting by Page will include a conglomeration of companies, with Google being the largest. Among Alphabet’s other companies will be Calico, an anti-aging company; Nest, a maker of Internet-connected devices for the home; Google Fiber, its high-speed Internet service; Google Ventures and Google Capital, its investment arms; and Google X, an incubator for projects like its self-driving cars.
Google itself will continue to include Google Maps, search, advertising, YouTube and its Android mobile operating system.
Some analysts see the changes as an admission by the company that it had become a bit too unwieldy. Its new structure seems to mirror another conglomeration of seemingly disparate assets – Warren Buffett’s Berkshire Hathaway. Berkshire’s assets include everything from interests in insurance companies, newspapers, railroads, corporate jet leasing company NetJet and Fruit of the Loom undergarments.
Investors appeared to like the change – Google shares were up 6.3% ($39.77 each) to $673.50 in after-hours trading Monday.
In the blog post, Page said that he and Brin had set out to form Google as an unconventional company, and the restructuring is a logical extension of that. Le he said Google continues to operate well, the new structure will make it “cleaner and more accountable.”
Page said he and Brin chose the name Alphabet “because it means a collection of letters that represent language, one of humanity's most important innovations,” but also “because it means alpha-bet (Alpha is investment return above benchmark), which we strive for!”
Alphabet Inc. will replace Google Inc. as the publicly-traded entity and all shares of Google will automatically convert into the same number of shares of Alphabet, with all of the same rights. Google will become a wholly-owned subsidiary of Alphabet. And its two classes of shares will continue to trade on NASDAQ under the symbols “GOOGL” and “GOOG.”
“We’ve long believed that over time companies tend to get comfortable doing the same thing, just making incremental changes,” Page said in the blog posting. “But in the technology industry, where revolutionary ideas drive the next big growth areas, you need to be a bit uncomfortable to stay relevant.”
Consumer Watchdog borrowed from Shakespeare to register its lack of enthusiasm for the Google's announcement.
“A rose by any other name is still a rose and Google by any other name is still the Internet giant,” said John M. Simpson, Consumer Watchdog’s Privacy Project director.
“Alphabet through what will now be called its subsidiary will continue to track us around the web and build digital dossiers about us," said Simpson in a statement. "It makes little difference to Google’s users. Consumer Watchdog said the move was undoubtedly prompted by criticism from investors that Google focused too much attention on speculative research projects that CEO Larry Page calls “moonshots.”
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