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Slimmer Google backs into Alphabet

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Google has undergone an unusual corporate re-organisation, with the launch of a new holding company, Alphabet, to be headed up by the existing Google top management.

Larry Page, new CEO of Alphabet and outgoing CEO of Google, writes on the corporate blog: “We’ve long believed that over time companies tend to get comfortable doing the same thing, just making incremental changes. But in the technology industry, where revolutionary ideas drive the next big growth areas, you need to be a bit uncomfortable to stay relevant.

“Our company is operating well today, but we think we can make it cleaner and more accountable. So we are creating a new company, called Alphabet. I am really excited to be running Alphabet as CEO with help from my capable partner, Sergey [Brin – co-founder of Google], as president.”

Sundar Pichai has been appointed as the CEO of Google.

“What is Alphabet? Alphabet is mostly a collection of companies. The largest of which, of course, is Google. This newer Google is a bit slimmed down, with the companies that are pretty far afield of our main Internet products contained in Alphabet instead.

“Fundamentally, we believe this allows us more management scale, as we can run things independently that aren’t very related. Alphabet is about businesses prospering through strong leaders and independence.

“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. In addition, with this new structure we plan to implement segment reporting for our Q4 results, where Google financials will be provided separately than those for the rest of Alphabet businesses as a whole.”

Page believes the new structure will allow the management team to focus on the opportunities that come up inside Google.

“Sergey and I are seriously in the business of starting new things. Alphabet will also include our X lab, which incubates new efforts like Wing, our drone delivery effort. We are also stoked about growing our investment arms, Ventures and Capital, as part of this new structure.”

Alphabet Inc will replace Google Inc as the publicly-traded entity and all shares of Google will automatically convert into the same number of shares of Alphabet, with all of the same rights. Google will become a wholly-owned subsidiary of Alphabet. Our two classes of shares will continue to trade on Nasdaq as GOOGL and GOOG.

“For Sergey and me this is a very exciting new chapter in the life of Google — the birth of Alphabet. We liked the name Alphabet because it means a collection of letters that represent language, one of humanity’s most important innovations, and is the core of how we index with Google search.

“We also like that it means alpha-bet (Alpha is investment return above benchmark), which we strive for. I should add that we are not intending for this to be a big consumer brand with related products – the whole point is that Alphabet companies should have independence and develop their own brands.”