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:
2/ Thus will put some pressure on these non-Google units under Alphabet from profitability perspective, avoid free riding.— Neil Shah (@neiltwitz) August 10, 2015
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).
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