Google Creates New Company Called Alphabet


Google Inc. is reorganizing into a holding company that gives its main Web operations greater independence while offering investors more visibility into ambitious plans to expand new businesses, including health and Internet access.

Alphabet Inc. will be name of the new conglomerate. Google Inc., along with YouTube, Android mobile software and other Web-based products, will be a key part of that. Alphabet will also include Calico, Google Ventures, Google Capital, Google X and other subsidiaries, the Web company said in a blog post Monday. The goal isn’t to make Alphabet a consumer brand, Page said.

The new structure will give greater clarity into how Google invests in various ventures, including driverless cars, high-speed Internet service and health-related technologies. It also makes it easier to make any future acquisitions or potential divestments. Wall Street cheered the news, pushing the shares up 5.9 percent in extended trading.

“There’s been a lot of speculation about how much money they put into these other ventures,” said Colin Gillis, an analyst at BGC Financial. “That will come to an end. This also gives them the structure to add in another business line if they were to acquire something. The mechanism is in place.”

Larry Page, co-founder and current chief executive officer, will hold that title at Alphabet, while co-founder Sergey Brin will be president. Ruth Porat will remain chief financial officer of the holding company. Sundar Pichai, Page’s deputy, will be promoted to become CEO of Google Inc., which generates the bulk of the company’s $60 billion in annual revenue.

New Structure

Omid Kordestani will transition from his role as chief business officer to become an adviser to Alphabet and Google.

“Sergey and Larry will be able to allocate their time differently between the core and non-core businesses,” said Sameet Sinha, an analyst at B. Riley & Co. “You have Sundar focusing on the core business, and you will have Larry and Sergey kind of looking at the future growth businesses.”

Shares of Google rose to $705.98 extended trading. The stock is up 25 percent this year, with much of the gains coming after the company reported quarterly results last month.

The new structure will be introduced in phases in the coming months. Alphabet will give its results as a holding company starting with the fourth-quarter earnings report, which is usually released in January.

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Source: Bloomberg | Brian Womack

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