The Strategist

Google Spells the Company Out

08/11/2015 - 14:54

Google announced a major restructuring, which involves the creation of a new holding company Alphabet. Alphabet, which was headed by Larry Page and Sergey Brin, will include Google itself and all its many subdivisions.

Google has announced a major reorganization, during which the company is going to create a new holding company called Alphabet. Search and advertising division of Google enters the Alphabet on a par with other parts of Google as a separate company. The restructuring will allow to separate the most profitable search advertising business on numerous areas of the company, including the production of robots and self-vehicles, research in the field of medicine, nanotechnology and so on.

As the leaders of Google reported in their statement, Alphabet will be led by Larry Page as CEO, and Sergey Brin as President. "We liked the name Alphabet, because it means a collection of letters representing the language, and the language - one of the most important inventions of mankind", - explained Larry Page. Each of Alphabet’s units will receive a separate Director General, who will report to Mr. Page. New Google after the restructuring will be headed by Pinchay Sundar, who has been managing the manufacturing and engineering direction in the Google Internet. Google will become the largest unit of Alphabet: it will include the search engine itself, as well as YouTube, Android and Chrome. These units account for almost the entire revenue of $ 66 billion that Google has received in the past year. Of these, 89% were obtained from the sale of advertising.
As expected at Google, the restructuring will allow better control of multiple units, the activities of which are significantly different from the primary. According to Larry Page and Sergey Brin, the work of the main divisions will become more transparent for investors, who have often been confused by Google’s investments in unusual startups. Pivotal Research’s analyst Brian Whizzer commented this situation: "It seems that the main purpose of all of this - to make it clear to investors that we hear your demands for greater transparency and give it to you. But the fact that they see all the data, does not mean that they cease to invest in areas that are very far from the main business. "

According to the plans, Google’s shares will be converted into shares of Alphabet and will be traded on the stock exchange under the name GOOG and GOOGL. Google shares in electronic trading rose 6.2% after the announcement of the restructuring.