‘G is for Google’: Tech giant reorganizes under ‘Alphabet’ umbrella

Agence France-Presse
Alphabet will be the new holding company for the tech giant's newer ventures such as the research arm X Lab, investment unit Google Ventures and health and science operations
Google co-founder Larry Page's note on the Alphabet website. Screenshot from Alphabet

SAN FRANCISCO, USA – Google unveiled a surprise corporate reorganization Monday, August 10, forming a new parent company dubbed Alphabet that will include the Internet search unit as one of several entities.

Google chief executive Larry Page announced the change, saying he would hold the same title at Alphabet, the new holding company for the tech giant’s newer ventures such as the research arm X Lab, investment unit Google Ventures and health and science operations.

At the search unit Google, the CEO will be current vice president Sundar Pichai.

“Our company is operating well today, but we think we can make it cleaner and more accountable,” said a statement from Page, a co-founder of the tech giant with Sergey Brin 11 years ago.

“So we are creating a new company, called Alphabet. I am really excited to be running Alphabet as CEO with help from my capable partner, Sergey, as president.”

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

Under the new structure, “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.” 

Alphabet will include units focusing on life sciences such as a glucose-sensing contact lens and the health research firm Calico, Page said. 

Google X, which handles research on self-driving cars and Internet balloons, will also be a separate unit

Other units to be separated include the drone delivery project Wing, Google Fiber’s high-speed Internet, the home automation unit Nest and investment arms of the California technology giant.

“Fundamentally, we believe this allows us more management scale, as we can run things independently that aren’t very related,” he said.

Strong leaders, independence

“Alphabet is about businesses prospering through strong leaders and independence. In general, our model is to have a strong CEO who runs each business, with Sergey and me in service to them as needed.”

Alphabet Inc. will replace Google Inc. as the publicly traded entity, and all shares of Google will automatically convert to shares of Alphabet, with all of the same rights, Page said.

Google will become a wholly-owned subsidiary of Alphabet. The Google unit will include search and search ads, maps, apps, YouTube, Android and related technical infrastructure, according to a regulatory filing.

The reorganization comes amid concerns that Google’s dominance of the tech sector may have peaked as the landscape evolves.

Google has for years been the leader in Internet search and has turned advertising linked to those searches into a highly lucrative business.

But its shares have struggled since hitting an all-time high in early 2014 and it has little to show for ventures in other areas: self-driving cars, Google Glass, Internet balloons, health care, Google TV, mobile payments, home automation and its Google+ social network, among others.

“This is a pretty assertive move on their part,” said Bob O’Donnell, who heads the consultancy TECHnalysis Research. 

“There have been a lot of questions about their ability to grow outside of search. Search has been their cash cow for a long time.” 

The new structure means that each of the projects including “wacky” ones would have to stand on their own and produce results, O’Donnell said.

“There has been a sense they need to be more serious about these things,” he told AFP.

Jan Dawson of Jackdaw Research agreed, saying in a tweet, “the biggest question about Google’s Alphabet transition is whether we finally get transparency over non-core business finances.”

Google shares rallied some 5.6% in after-hours trading on the news to $669.08 – Sophie Estienne, AFP / Rappler.com