In 1998, Google started as a company that provided internet products including search and advertising. Over the years, the company has ventured into many seemingly unrelated ventures such as Life Sciences, longevity technology, robotics and so much more. It seems a split of the Google Company into smaller independent units was a long time coming.
Google Restructures Into New Company, Alphabet
Google has announced its new company, Alphabet. Alphabet will now be the umbrella body housing other independent companies, with Google being the largest of these companies with its usual operations being search, YouTube, ads and Android.
Sundar Pichai, who has worked at Google since 2004 and most recently as the vice president of products will take over as the new Google CEO.
The same executive structure in Google will continue to be in charge of Alphabet. Sergey Brin and Larry Page, the co-founders of Google, will now run Alphabet, the new umbrella company as president and CEO respectively. Eric Schmidt will continue being the Executive Chairman, Ruth Porat will still be the CFO while David Drummond will remain the Chief Counsel.
Besides Google, other smaller and independent companies under Alphabet include Life Sciences (deals with contact lens technology), Google X lab (deals with driverless cars, drone delivery and Google Glass), Calico (deals human longevity technology). Other companies that will be incorporated into the Alphabet umbrella include Google Capital and Google Ventures.
The same leadership will continue to be in charge of the independent companies. Tony Fadell will continue to lead Nest, Dan Doctoroff will still be in charge of Sidewalk Labs, Arthur Levinson will be leader of Calico while Susan Wojcicki will continue to be YouTube CEO and will report to Google CEO, Sundar Pichai.
The new Alphabet Company is not intended to be a large consumer brand. Rather, the newly independent companies will operate on their own and take greater risks without interference from other departments.
Implications for shareholders
By the end of 2015, the Alphabet holding company will own all of Google’s capital stock. This means that for every Google share a shareholder owns, they will receive an Alphabet share. Initially, Alphabet will be directly and wholly owned as a Google subsidiary. Later, Alphabet will pursue a merger to create a new entity that will be owned directly and wholly as an Alphabet and indirectly as a Google subsidiary.
Each Google share that is converted into an Alphabet share will have similar rights, power, limitations, and designations.
In the last financial quarter, Google’s sales accrued to $17.7 billion, with advertising sold through Android, YouTube, partner websites and search accounting for the greatest share of the sales revenue. This year, Google’s stock has risen by a significant 25% and by an additional 6% following the announcement of the organizational restructuring. In the same last quarter, the company posted profits of $4.3 billion profits and a cash flow of $61billion.
The new Alphabet company will continue to trade under Google’s standard ticker symbols—GOOGL and GOOG. The organizational restructuring will be in effect this year but Alphabet’s new website is already operational at abc.xyz.