Google announced a major corporate restructuring based on the creation of a holding company called Alphabet that will contain the companies now owned by Google. Google’s co-founder Larry Page (Photo ©Marcin Mycielski) will be the CEO of Alphabet and the other co-founder Sergey Brin will be its President. Google’s name will continue to exist as one of the new holding’s companies with Sundar Pichai, who’s been working there since 2004 and has been involved in the Android and Chrome projects, as its CEO.
Larry Page explained that this restructuring was decided to allow to manage business operations now become very numerous in the most efficient manner. Google was founded as a search engine but over the years added much more, going far beyond the Internet and information technology. As an example, Google’s co-founder mentioned Calico, a company started to work in research on longevity.
According to what Larry Page stated, they’ll better manage separately assets that are not very connected. Alphabet is a way to obtain a company’s prosperity through strong leaders and independence. Basically, every company part of Alphabet will have a strong CEO to run it with Page and Sergey Brin to help when needed.
Google shares will be automatically converted into the same number of Alphabet shares. Google is the most important subsidiary of the holding but slightly slimmed down to focus on its historical products related to the Internet such as a search engine, YouTube, Maps, Android and advertising services to leave the others to other companies.
Besides Calico, in Alphabet there will be companies such as Nest, acquired at the beginning of 2014 by Google, Fiber, the company in charge of providing high-speed Internet connessioni, and Google X, the secretive subsidiary working on advanced research projects.
The announcement was a surprise but the markets reacted very well because the value of Google shares on Wall Street, waiting for the official name change, rose considerably. The recent trend among large companies is to focus on a certain type of activity, even splitting it or selling business divisions. Stock markets appreciate these maneuvers because they allow to more easily find ways to increase share value. It will take time to figure out what will change for Google / Alphabet’s customers but from the business / finance point of view it already seems an excellent move.
