Alphabet’s new structure will give investors a better understanding of how well each of Google’s former “side projects” (now Alphabet subsidiaries) are performing, as well as more clarity about Google’s core business.
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The Silicon Valley behemoth is reorganising under a new name Alphabet and separating its moneymaking businesses from the moonshot ones.
They also said that Sundar Pichai is taking over as CEO of Google.
From an Irish perspective, the primary interest will be in how the creation of Alphabet affects the company’s global tax operations, given the role Google’s Irish operation plays in handling worldwide revenues. He said it was because it represents (1) language, which is a human innovation; (2) the main method used for indexing with Google search; and (3) “Alpha” returns on investment – if broken down, the name spells out “alpha-bet”, meaning returns above the benchmark. In a memo to investors, Page said he wants to make the company “cleaner and more accountable”.
Many other companies will operate under Alphabet acting as the parent holding company, including Google, a company focused on health efforts called Life Sciences, and a company focused on longevity called Calico. Page suggested this could drive further investment in experimental technology, adding that the Alphabet team was excited to start “investing at the scale of the opportunities and resources we see”. Co-founder Sergey Brin will be president of Alphabet, while the highly rated Sundar Pichai appears to be the biggest victor, taking the reins as chief executive of what might be termed “classic flavour” Google.
Unlike Google, Alphabet is to merely provide the much-needed independence Google’s unrelated projects need to grow and deliver successful results.
He has worked at Google – which was founded in 1998 – since it went public in 2004, most recently as the senior vice president of product.
Jan Dawson at Jackdaw Research said that with the transformation, “it will finally become clear quite how large and unprofitable all the non-core initiatives at Google are, which might well increase pressure from shareholders to exit some of those businesses”. The model, apparently, is inspired by Warren Buffett’s Berkshire Hathaway, which Page expressed admiration for in an interview with the Financial Times a year ago.
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“For example, if a unit is doing well or badly they can dial it up or down, they can form partnerships or different companies”, said Kay of Endpoint Technologies. However, it would continue to trade on the NASDAQ under its two current tickers, GOOG and GOOGL. The restructuring announcement led to a spike of over 5% in after-hours trading.
