Google announced today in a surprise blog post and SEC filing that the company is going through some restructuring. Google is becoming a new entity known as Alphabet. Google search will remain a subsidiary, with Youtube remaining with Google. Google Fiber, which is a cable-like TV and broadband service, will become separate. Not all of the new corporate structuring has been revealed.
Alphabet subsidiaries are set to include Life Sciences, which is currently developing a glucose-sensing contact lens, Calico, which studies longevity, Nest, Google Ventures, Google Capital, and Google X. Alphabet is set to introduce the new structuring for the Q4 report, with Google showing up separate from other lines. It was also announced today that Larry Page will be the SEO of Alphabet. Sergey Brin has been named President. Eric Schmidt will be Alphabet Executive Chairman.
Sundar Pichai, who serves as Google's SVP of Products is set to become CEO of the subsidiary. Alphabet is the new name for the publicly traded business. Shares will retain their current stock symbols: GOOGL and GOOG. In the post, Larry Page had this to say.
"Our company is operating well today, but we think we can make it cleaner and more accountable. Our model is to have a strong CEO who 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."
The blog post also goes onto describe what Alphabet is, giving everyone a better understanding of this restructuring. Larry Page goes onto say this about the upcoming changes.
"What is Alphabet? Alphabet is mostly a collection of companies. The largest of which, of course, is Google. This newer Google is a bit slimmed down, with the companies that are pretty far afield of our main internet products contained in Alphabet instead. What do we mean by far afield? Good examples are our health efforts: Life Sciences (that works on the glucose-sensing contact lens), and Calico (focused on longevity). Fundamentally, we believe this allows us more management scale, as we can run things independently that aren't very related. Alphabet is about businesses prospering through strong leaders and independence. In general, our model is to have a strong CEO who 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. In addition, with this new structure we plan to implement segment reporting for our Q4 results, where Google financials will be provided separately than those for the rest of Alphabet businesses as a whole."
Towards the end of the initial report, Larry Page goes onto explain why they chose the Alphabet name.
"For Sergey and me this is a very exciting new chapter in the life of Google-the birth of Alphabet. 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."
This is certainly a lot to digest. Larry Page hopes that these changes will help get more ambitious things done. His company is taking the long-term view, while hoping to empower great entrepreneurs and companies to flourish. Over all, the changes to Alphabet will ensure that Google is even better through greater focus. And the main goal is that it will improve the lives of as many people as it can. What do you think?