The company's surprise reorganization will allow it to both focus and dream big.

Mitch Wagner, Executive Editor, Light Reading

August 10, 2015

8 Min Read
Google Sings 'Alphabet' Song

Google has bigger things to do than run a business. It's looking to bring about the next step of human evolution.

With initiatives that include machine learning, self-driving cars, robots and longevity research, Google is clearly bent on partnering human beings with machine intelligence to achieve greatness.

This might be the greatest mission in the history of humanity. It might be the biggest blasphemy since the Tower of Babel. But it's definitely a big project, one that can distract a company from the day-to-day work of running an advertising-driven business that has to bring in revenue, hit profitability goals, satisfy shareholders, get products out the door on time and keep the cafeteria stocked in bottled water.

That conflict underlies Google's surprise decision Monday to reorganize. Founders Larry Page and Sergey Brin are stepping aside -- and up -- to head a new company, named Alphabet, as CEO (Page) and president (Brin), Page said in a post Monday on Google's company blog, and linked from the new Alphabet home page at

Alphabet will be a holding company for all of the old Google's various projects. Old-Google's core Internet business will be operated by a company still called Google, headed up by Sundar Pichai, who is currently senior vice president of products at Google, overseeing product management, engineering and research efforts for products and platforms. The change will take place at an unspecified date later this year, Google says.

Alphabet will also comprise other companies for Google's other interests, including Life Sciences, which is working on a glucose-sensing contact lens; and Calico, which is focused on longevity research, Page says.

Alphabet will have X lab, Google's unit for experimental technology, including Wing, its drone delivery project. Page said he and Brin are "also stoked" about growing their investment units, Ventures and Capital, as part of the new structure.

The breakdown as we know it: The new Google company gets search, ads, maps, apps, YouTube, Android and "related technology business." Under Alphabet are Calico, Next, Fiber, investing arms Google Ventures and Google Capital, and incubator projects such As Google X, according to Google's SEC filing.

Figure 1: Alphabet Soup [Source: Nick Harris Creative Commons Attribution-NoDerivs 2.0 Generic license] [Source: Nick Harris Creative Commons Attribution-NoDerivs 2.0 Generic license]

Strong CEOs will run each business, with Page and Brin managing capital allocation and working "to make sure each business is executing well," Page says on the blog. In addition to Pichai as CEO of Google, Susan Wojcicki will continue as CEO of YouTube. In addition to Page and Brin, former Google CEO Eric Schmidt will join Alphabet as executive chairman, the SEC filing says.

Puchai, 43, previously served as Google's SVP of Android, Chrome and Apps.

In a move that will make investors happy, Google will implement segment reporting, beginning with its fourth quarter results, with Google financials reporting separately from the remaining Alphabet business as a whole.

The reorganization will increase transparency, Neil Shah, a partner and director at Counterpoint, a technology market research and analyst firm, said on Twitter:

Find out more about the New IP on Light Reading's New IP Channel.

Alphabet Inc. will replace Google Inc. as the publicly traded entity, with all shares of Google automatically converting to the same number of shares of Alphabet, with the same rights. Google will become a wholly owned Alphabet subsidiary. The two classes of shares will continue to trade on Nasdaq as GOOGL and GOOG.

The reorganization will allow Google to have its cake and eat it too. Page and Brin will be able to focus on blue-sky crazy ideas at Alphabet, while Google itself and other subsidiaries focus on running the day-to-day business (the elements of which were blue-sky and crazy not too long ago, as Page notes).

Next Page: Not Button-Down and Boring

Not that the new Google will be all button-down and boring. The Verge highlights its own interview with Pichai, published May 29, where he articulates his vision that Google should "not just build technology for certain segments" but rather "drive technology as an equalizing force, as an enabler for everyone around the world." Pichai says he wants Google to make sure "computing is more accessible, connectivity is more accessible" and use machine learning to assist users. "Because over time, someone who has [access to] just a smartphone hopefully has... the same [capabilities] as someone who is more privileged," Pichai told The Verge.

The New IP
Google and the other so-called "hypercloud providers" -- Inc. (Nasdaq: AMZN), Facebook and Microsoft Corp. (Nasdaq: MSFT) -- are leading the march toward the New IP, virtualizing networks to cut costs, increase agility and innovate.

Google looms large in the communication service provider ecosystem, usually as a partner, sometimes as a competitor, to conventional CSPs.

Enterprise customers look to carriers to connect to Google Cloud and Apps, and services such as YouTube drive demand for consumer Internet services, even while YouTube competes with cable TV and telco video initiatives. Pichai told The Verge in May that Google works with over 550 carriers delivering Android handsets.

Google is also driving the technology that operators are adopting, including software-defined networking, the cloud, virtualization and more.

Google launched Project Fi in April, combining 4G cellular networks and WiFi to offer Americans at home and abroad fast service at a flat, low rate, in partnership with Sprint Corp. (NYSE: S) and T-Mobile US Inc. (See Google's WiFi-First Mobile Service 'Fi' Is Here.)

At about the same time, Google issued a status report on Project Loon, a plan to use high-altitude balloons equipped with radios to bring wireless connectivity around the world, in partnership with Vodafone New Zealand, Telefónica SA (NYSE: TEF) and Telstra Corp. Ltd. (ASX: TLS; NZK: TLS). (See Google Ready to Release Thousands of Loons .)

Analyst Jan Dawson said in a blog post that the reorganization is driven by both personal and financial reasons. On the personal side: "Larry and Sergey have quite clearly been increasingly uninspired by merely running a search engine and advertising business, and this finally aligns their job titles with what they actually want to spend their time doing. It also gives Sundar Pichai a well-deserved promotion and presumably prevents him from leaving for a CEO job somewhere else."

From a financial perspective, the new organizational structure will let Google better show off the strength of its core businesses, separate from the financial drain imposed by its more visionary business units, Dawson says. In that regard, it parallels Amazon's separately reporting results of its AWS business. (See Amazon Web Services: $5B & 'Growing Fast'.)

Also, the new legal structure will make acquisitions and spinoffs easier, Dawson says.

In typical Google fashion, Page's blog post contains an Easter egg, a hidden link buried in the HTML to Hooli, the fictional company in the HBO show Silicon Valley.

We're still awaiting confirmation that this is Alphabet Inc.'s theme song.

And Wired anticipates the owner of the @alphabet Twitter handle can soon expect a big payday. The "Dad. Husband. And self-proclaimed geek" had 880 followers when Wired posted its article at 5:44 pm EDT; by 7:16 pm that had nearly doubled, to 1,640.

— Mitch Wagner, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profileFollow me on Facebook, West Coast Bureau Chief, Light Reading. Got a tip about SDN or NFV? Send it to [email protected].

About the Author(s)

Mitch Wagner

Executive Editor, Light Reading

San Diego-based Mitch Wagner is many things. As well as being "our guy" on the West Coast (of the US, not Scotland, or anywhere else with indifferent meteorological conditions), he's a husband (to his wife), dissatisfied Democrat, American (so he could be President some day), nonobservant Jew, and science fiction fan. Not necessarily in that order.

He's also one half of a special duo, along with Minnie, who is the co-habitor of the West Coast Bureau and Light Reading's primary chewer of sticks, though she is not the only one on the team who regularly munches on bark.

Wagner, whose previous positions include Editor-in-Chief at Internet Evolution and Executive Editor at InformationWeek, will be responsible for tracking and reporting on developments in Silicon Valley and other US West Coast hotspots of communications technology innovation.

Beats: Software-defined networking (SDN), network functions virtualization (NFV), IP networking, and colored foods (such as 'green rice').

Subscribe and receive the latest news from the industry.
Join 62,000+ members. Yes it's completely free.

You May Also Like