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Google to shelter under new holding company Alphabet

Tue 11 Aug 2015

Google Alphabet

Google is to disperse its products and services to different arms of a new holding company called Alphabet, according to a blog-post yesterday from CEO Larry Page. The post is repeated on the front page of the umbrella company’s Spartan new website https://abc.xyz/ (and several have noted that China has lost no time in blocking the domain).

Alphabet, which will be registered later this year, will retain Page as CEO and will render Google’s public and corporate activities ‘cleaner and more accountable’, according to Page.

‘Alphabet is about businesses prospering through strong leaders and independence.,’ says Page ‘In general, our model is to have a strong CEO who runs each business, with Sergey and me in service to them as needed. We will rigorously handle capital allocation and work to make sure each business is executing well. We’ll also make sure we have a great CEO for each business, and we’ll determine their compensation,’

The organisational restructuring has been likened to American multinational conglomerate Berkshire Hathaway, owned by American business magnate Warren Buffet.

The post was made after the close of trading yesterday, but after-hours trading saw Google’s stock rise five points. Page announced that existing Google shares will automatically convert into Alphabet shares, with Google retained as a wholly-owned subsidiary of the new parent company. The NASDAQ share names GOOGL and GOOG will be retained.

Page says that the new initiative will allow Google’s core money-making internet services to distinguish itself from its growing research arm, mostly under Google X, including such innovative fields of research as self-driving cars and drone delivery, as well as Google Financials.

Page notably praises the efforts and acumen of new Google CEO Sundar Pichai (Pichai Sundararajan), whose promotion was made public on 10th August. “He has really stepped up since October of last year,” Page says. “when he took on product and engineering responsibility for our internet businesses. Sergey [Brin] and I have been super excited about his progress and dedication to the company. And it is clear to us and our board that it is time for Sundar to be CEO of Google. I feel very fortunate to have someone as talented as he is to run the slightly slimmed down Google and this frees up time for me to continue to scale our aspirations,”

Despite opining that Alphabet will usher in a new transparency to Google’s performance reporting, some doubt has emerged as to whether the reverse might not be the case, with the new segmentation providing opportunity for previously accountable sectors of the Google empire to snuggle in new obscurity. Pivotal Research Group analyst Brian Wieser commented:

“It may be overly optimistic at this point to hope for discrete business unit break-outs for [Google’s advertising network] (with perhaps $10bn of gross revenue this year?), YouTube (with perhaps $5bn of revenue this year?), other Doubleclick related activities, Google Play, Android, etc, etc. Further, it remains to be seen whether or not key cashflow items such as capital expenditures—which are not commonly broken out by companies with multiple reporting segments, but which are particularly critical for Google—will be disclosed at the segment level,”

The code of the new domain’s repost of the Page article contains a disarmingly self-mocking link to a satirical self-promotional page from Mike Judge’s HBO show Silicon Valley, which lampoons the visionary bombast of the Google ethos.

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