Google transforms into new Alphabet tech conglomerate
Google has unveiled a broad corporate restructuring intended to accelerate its transformation from a search and advertising company into a conglomerate with stakes in some of the most promising long-term tech markets.
The move will see the company renamed Alphabet as it takes on a holding company structure that relegates its historical internet business to subsidiary status.
The move also takes founders Larry Page and Sergey Brin away from day-to-day involvement in the business they founded as graduate students 16 years ago, casting them instead as heads of a new holding company with tentacles stretching throughout the tech world.
The restructuring follows concerted pressure from Wall Street over the huge costs and capital investments Google has taken on as it diversifies away from its core business with bets on new markets like driverless cars, “smart home” appliances and healthcare.
Responding to calls for more disclosure as Google moves into new markets, the company said that for the final quarter of this year it planned for the first time to report the results of its internet businesses separately from all its other initiatives. The restructuring would make the new holding company’s operations “cleaner and more accountable,” Mr Page said in a blog post.
Mr Page and Mr Brin have shown signs for some time of stepping back from direct management of their search and advertising business, as their personal interests have moved to bigger, riskier — and occasionally more outlandish — ideas.
According to people who have worked with him, Mr Page has become progressively less involved in the company’s internet operations and has shown less interest in its quarterly results, turning his attention instead to its big long-term bets.
Speaking in an interview with the FT last year, Mr Page said he saw Google becoming more like Warren Buffett’s Berkshire Hathaway, making bets in a series of unrelated markets. That would cast him as head of a holding company, pushing responsibility on to more independent managers who would oversee Google’s different businesses.
At the time, he said that there was no model for the kind of company he wanted Google to become, though Mr Buffett came closest to having all the qualities that would be needed to run such a group.
A backlash over privacy, among other things, led Google to abandon plans to launch Glass in its current form as a consumer product, instead putting it under a different manager. The company has not said since then whether Mr Brin has taken on any other direct responsibilities.
The shake-up will see Sundar Pichai, already the company’s most senior product executive, take over management of all its existing core businesses with the new title of chief executive officer of Google Inc, as the Alphabet internet subsidiary will be known. The elevation marks the second time recently that a product of India’s technical education system has risen to head a leading US tech company, following Satya Nadella’s rise to the top job at Microsoft.
Google looks beyond search for growth
An iPad showing the Google search engine home page as the internet giant celebrates it's 15th birthday today. PRESS ASSOCIATION Photo. Picture date: Wednesday September 4, 2013. The firm has come a long way since September 4 1998, when it was incorporated by founders Larry Page and Sergey Brin, who had met une at university three years previously. It was originally called BackRub, but they eventually settled on the name for the website that has become synonymous with internet searching today - so much so that it is used as a verb in its own right. See PA story TECHNOLOGY Google. Photo credit should read: Chris Radburn/PA Wire
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In the blog post announcing the moves, Mr Page said the new name for the holding company was also a pun on “alpha-bet” — a reference to the huge investment Google was willing to stake on ideas that had the chance to outperform other stock market investments, known in market terminology as “alpha”.
Mr Page and Mr Brin have long set a deliberate course to avoid the fate of Microsoft, which failed to use the profits from its software monopoly to build leading positions in other big tech markets and has been left struggling to catch up in the mobile world.
(FILES) - File picture taken March 2, 2015 shows Google's Senior Vice President Sundar Pichai giving a keynote address during the opening day of the 2015 Mobile World Congress (MWC) in Barcelona, Spain. Google unveiled a new corporate structure August 10, 2015, creating a parent company dubbed Alphabet led by chief executive Larry Page, with the Internet search unit as one of several entities. In a surprise announcement, Page said Alphabet will be the umbrella company for the tech giant's research arm X Lab, investment unit Google Ventures and health and science operations, as well as the search unit Google, whose CEO will be current vice president Sundar Pichai. AFP PHOTO / LLUIS LLENELLUIS GENE/AFP/Getty Images©AFP
“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.”
Along with Mr Page, who will be chief executive of Alphabet, and Mr Brin, who will take on the title president, other early Google executives to leave the internet business to take on roles in the holding company are Eric Schmidt, who will become executive chairman, and chief legal officer David Drummond, who will take on the same role for Alphabet.
The shares will continue to trade on the Nasdaq under the symbols ‘GOOG’ and ‘GOOGL’. Shares of the class A common stock climbed 6 per cent in after-hours trading to $705, adding more than $28bn to the group’s market valuation.