In perhaps one of the biggest announcements ever made in the history of web, Google Inc, has announced the creation of a new parent company called Alphabet Inc. Alphabet will replace the search engine behemoth as the publicly traded entity and subsequently all its shares will be converted into the same number of shares of Alphabet, governing the same rights.
So What exactly 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.
Good examples of ‘far afield’ companies includes Google’s health efforts: Life Sciences (that works on the glucose-sensing contact lens), and Calico (focused on longevity). Fundamentally, Google says that this allows it more management scale, as we can run things independently that aren’t very related.
Henceforth, Larry Page will helm Alphabet as its CEO and fellow co-founder Sergey Brin will be its President. Eric Schmidt will be donning the role of the Executive Chairman of Alphabet.
In another major exec rejig, Sundar Pichai, the current Android boss, has been announced as the new CEO of Google Inc, and Ruth Porat, the Chief Financial Officer of Google will now take over as the CFO of Alphabet. All of Google’s current directors will consequently become the directors of Alphabet.
Page stated that
Alphabet is mostly a collection of companies, the largest of which is Google. The new arrangement will however come into effect some time later this year.
The new mother company will include Calico, X lab, and other units that deal with life sciences, along with Google’s investment arms, Ventures and Capital will all be under the umbrella of the Alphabet.
Google no doubt remains ‘the biggest piece of the Alphabet’ and will become its wholly-owned subsidiary. The company’s two classes of shares will, however continue to trade on Nasdaq as GOOGL and GOOG.
So why this structural rejig ? For good at first.
Moreover, both Sergey and Larry believe that the move will help Google –Alphabet from now on- to be more ‘accountable and cleaner’. The new parent company will allow its other units to function independently and also develop its own brands. This will turn Google from a company into a product, and failure of its other units or products will minimize the damage to the parent company, its founders believe.