Google Inc to become Alphabet in new operating structure

New holding company to encompass search engine unit and other subsidiaries

Google chief executive Larry Page: “This new structure will allow us to keep tremendous focus on the extraordinary opportunities we have inside of Google.” Photograph: Eduardo Munoz/Reuters

Google chief executive Larry Page: “This new structure will allow us to keep tremendous focus on the extraordinary opportunities we have inside of Google.” Photograph: Eduardo Munoz/Reuters

 

Google announced a new operating structure on Monday, creating a holding company called Alphabet to encompass the search engine unit and other subsidiaries.

Alphabet Inc will replace Google 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.

“This new structure will allow us to keep tremendous focus on the extraordinary opportunities we have inside of Google,” Larry Page said in a blog post.

The unusual structure, announced after the close of stock-market trading, leaves Mr Page in charge of the company as chief executive. Fellow co-founder Sergey Brin will become president of Alphabet, and Eric Schmidt will be executive chairman.

Sundar Pichai will be the chief executive of Google Inc, while current Google Chief Financial Officer Ruth Porat will become CFO of Alphabet. Google’s current directors will become directors of Alphabet.

Mr Page said “Alphabet is mostly a collection of companies, the largest of which is, of course, Google.”

The company said the new arrangement will take effect “later this year.”

YouTube and other web companies form its research and investment divisions. The shares rose as much as 5.8 percent in extended trading after the company said Alphabet Inc will be the name of what will effectively be a new holding company.

It will include Google Inc and Google Ventures, Google Capital, Google X and other subsidiaries, the web company said in a blog post on Monday.

Mr Page will be Alphabet’s chief executive officer, while co-founder Sergey Brin will be president.

Longer-term endeavours

The goal is not to make Alphabet a consumer brand, Mr Page said. Google is adopting this structure in order to make clearer the difference between its main business and longer-term endeavours, as Mr Page and Mr Brin take on more strategic roles, while leaving operational management to trusted deputies.

“We’ve long believed that over time companies tend to get comfortable doing the same thing, just making incremental changes,” Mr Page wrote in the post.

“Our company is operating well today, but we think we can make it cleaner and more accountable.”

Shares of Google fell less than 1 per cent to $663.14 at Monday’s close in New York. The stock is up 25 per cent this year, with much of the gains coming after the company reported quarterly results last month.

The new structure will be introduced in phases over the coming months. Alphabet will report its results under this new structure commencing with the fourth-quarter earnings release, typically posted in January.

With this move, investors will get more details on how the businesses are operating, a long-standing request from Wall Street.

Under the change, the core Google company will report separately from the investment and research arms, according to a filing.

“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,” Mr Page said. “We also like that it means alpha-bet [Alpha is investment return above benchmark], which we strive for!”

Bloomberg