Google Inc. is now Alphabet Inc.
In a letter to shareholders on Monday, Google’s current CEO Larry Page spelled out what seems like a seismic change in the Internet search giant: The incorporated company now falls under a new holding company, called Alphabet, run by the two co-founders, Page and Sergey Brin. Omid Kordestani, Google’s current chief business officer, will be an adviser to Alphabet.
And Google, as it stands today, falls under the purview of Android SVP Sundar Pichai. Google shares rose 5 percent in after-hours trading.
Page wrote: “Sergey 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.”
The company will trade under a different name, but little else has changed. This structure has been in the works for some time, beginning last October when Page restructured the organization, putting Pichai at the head of all Google products. In recent years, Page has been pushing the company to operate like Berkshire Hathaway, as a constellation of companies tied together through investments.
As CEO of Google, Pichai now controls the suite of existing Google products and services. The moonshots — the drone delivery program and unannounced Google X projects — fall under Alphabet, along with Google’s two investment arms, Ventures and Capital.
We will add updates as we find out more.
Update: All right! We have a little more clarity, but not much. As Kara Swisher wrote, many of the changes are about segmenting off Google’s profitable business from its moonshots, or investment and incubation arms, as Google/Alphabet puts it.
For more than a year, Page and his lieutenants have tried to convince Wall Street that they could make big expensive bets on grand projects without threatening the margins at their core, money-making ad business. This split makes it easier to make that argument.
Google told us that the overhaul is coming for two reasons: 1) Giving more transparency to Wall Street (particularly for the investors clamoring for tighter governance and clarity around capital allocation). 2) Giving more autonomy (and fancier titles) to the Google’s chieftains. Here are those chiefs who now sit under Alphabet:
- Tony Fadell, of Nest Labs, who Page is relying on to lead hardware efforts
- Arthur Levinson, of Calico, the longevity research division
- Craig Barratt, of Fiber, the high-speed broadband service
- Dan Doctoroff, of Sidewalk Labs, the new company for cracking urban problems
- Sergey Brin, now president of Alphabet and still overseer of X, which includes Project Loon, Wing (drones) and self-driving cars
- David Lawee, who runs Google Capital
- Bill Maris, who runs Google Ventures
The nascent robotics division, and the litany of robotics companies Google has acquired, will live within Alphabet.
Google’s new CFO, Ruth Porat, will serve double duty as financial lead of both Alphabet and Google. Only those two entities will report revenue lines — that means no further disclosure for the other divisions. When Alphabet first reports its earnings, Google warned us not to expect a whole lot of financial granularity. We likely won’t see individual product sales, i.e. Nest thermostats sold.
So how will Wall Street, which sent Google shares up six percent in after-hours trading on Monday, feel tomorrow when it discovers just how little it really knows?
Update II: An earlier version of this post said that A.I. team Deep Mind would operate within the search unit of Google Inc. That’s not necessarily the case, according to sources familiar. Clearly, some things are still being sorted out.
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