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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 abc.xyz.

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.

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

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kq4ym 8/21/2015 | 9:51:37 AM
Re: Details of the breakdown The Alphabet?Google plan explanation seems a bit obscure to me. I'm guessing there's something more behind the plan not yet explained. It almost seems backwards to rebrand Google as Alphabet.
mhhf1ve 8/11/2015 | 4:08:15 PM
Re: Details of the breakdown I thought it was interesting to see Fiber separated out from Google.. and it will be more interesting to see how parts of Google may get spun off in the future. YouTube is still under Google, but when will investors finally demand to see YouTube's financial performance reported separately? YouTube has its own CEO, so maybe it will get spun out someday.

Chrome OS? Google for Business? How will these items be categorized in the future? Android might also be a spin off target in the future?

I also wonder how anti-monopoly lawsuits might affect future spinoffs....
brooks7 8/11/2015 | 12:28:44 PM
Uhhh "This will increase pressure on Google's core business -- the initiatives headed up by Sundar Pichai -- to show profitability."

You mean the most profitable business model on the planet?

I think this thing might really screw up Google.

You have the core Google Advertising business (and that is the business they are really in).  And then you will have the very cutting edge cool businesses.  Who wants to work for the big Ad agency and who wants to work on cool stuff that nobody ever cares about whether they make money or not?  All the cool kids want to work at the latter.  Like the Founders who are clearly bored with this incredible printing press they made and want to play.  I say good for them - go play.

seven

 
Mitch Wagner 8/11/2015 | 12:18:04 PM
A-B-C-D-E-F-G.... 26 reasons Google created Alphabet: Terrific analysis by financial reporter Felix Salmon, confirming that the restructuring is largely about lawyers, accountants, and perception:

"Google has a modest amount of debt – about $8 billion – which is incredibly low for a mature company of its size. At some point, much like Apple, it's likely to start levering up, issuing more debt and buying back its own stock. But lenders don't want to lend to a company in the business of crazy moon-shots like self-driving cars, because those businesses don't make money, and also because they come with massive contingent liabilities. (Just imagine the possible class-action suits if the cars get hacked and start killing people.) So there's now a borrowing vehicle – the Google subsidiary – which is effectively insulated from the other subsidiaries, and which will therefore be able to borrow at a lower rate than the parent company could."

The structure also shields new-Google from potential liabilities arising from its research into artificial intelligence, self-driving cars, the genome, and such. If a Google self-driving car goes rogue and starts killing people, the corporate structure might create a legal liability shield for Google.

Also, this:

"Largely lost in the Alphabet announcement is the fact that Alphabet, for all its fancy new branding, is still at heart a media company selling eyeballs to advertisers. Larry might feel that he can now rise above such matters. But his CFO can't."

 

 

 
DaveZNF 8/11/2015 | 12:06:58 PM
Accountability Given Google's eclectic range of services and interests (self-driving cars!), I wonder if this move is designed to give the investment community a better view along with requiring greater accountability from each of their various initiatives.

Google's never been shy about shutting things down (Wave) or pivoting (Google+), but by bestowing autonomy and oversight to distinct business units should significantly impact how and what is produced... and perhaps not always for the better. Will we see fewer skunkworks? Can something like an unprofitbable Google Glass with limited market exist under Alphabet?

As a consumer, I'm still waiting to see how or if the BILLIONS Google, er Alphabet, has invested in Nest, Dropcam, and Revolv substantially improve my home tech via whichever vertical in which they land. 
danielcawrey 8/11/2015 | 11:37:06 AM
Re: Details of the breakdown Just when you're not sure if Google knows what it is doing, you're surprised yet again. 

I think this is a great move. Search may not be the ultimate business for Google, and in order to grow and change, I think that this was a necessary thing for the company to do. 
Mitch Wagner 8/11/2015 | 10:19:01 AM
Increased pressure This will increase pressure on Google's core business -- the initiatives headed up by Sundar Pichai -- to show profitability. 

In other news: @alphabet on Twitter is now up to 3,441 followers. 
cnwedit 8/10/2015 | 9:59:28 PM
Re: Details of the breakdown Thanks for that. What I was wondering was more about their core networking and distribution technologies. and I have looked and haven't seen any discussion of that. Just too geeky, I guess!

 
Ariella 8/10/2015 | 9:36:51 PM
Re: Details of the breakdown In the NYT article on it, we get some general divisons as follows:

Under the new structure, Mr. Page is to run Alphabet along with Sergey Brin, who co-founded the web search business with him in 1998. Alphabet would be the parent entity, housing several companies, with the biggest among them Google. In addition, the portfolio would include Nest, the smart thermostat maker, and Calico, a company focused on longevity, among other things. Sundar Pichai, who had been senior vice president in charge of products, will be chief executive of Google, which will encompass Internet such products as search, maps, YouTube and applications like Gmail.

 


With respect to pioneering, it says, 

With its new structure, Google can give operating divisions more leeway in making their own decisions and keep the businesses more nimble. The configuration is reminiscent of that of Berkshire Hathaway, Warren E. Buffett's industrial empire, a giant conglomerate that includes railroads and Fruit of the Loom underwear.

"We've long believed that over time companies tend to get comfortable doing the same thing, just making incremental changes," Mr. Page wrote. "But in the technology industry, where revolutionary ideas drive the next big growth areas, you need to be a bit uncomfortable to stay relevant."

 

cnwedit 8/10/2015 | 9:01:34 PM
Details of the breakdown It will be interesting to see what is included in "related technology businesses." Not Google Fiber or drones. But the basic networking stuff Google is pioneering - where does that go?
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