Google’s Larry Page has posted a blog post today on the company’s website that is going to come as a bit of a shock for some. Google is about to become a part of an all new start up of Larry and Sergey Brin. The company, Alphabet, will become the parent company of Google along with many of the other projects that will become companies in their own right. It’s a big and ambitious move.
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. What do we mean by far afield? Good examples are our health efforts: Life Sciences (that works on the glucose-sensing contact lens), and Calico (focused on longevity). 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.
The changes coming to Google are not insignificant and they will likely impact many of the services we use today.
In the blog post, Larry outlines that Alphabet will become the parent company and that current Google stock will be converted to the new Alphabet stock with all the same values and rights.
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.
When describing why they want to do this change, Larry is pretty transparent. He also points out that Sundar Pichai is now the new CEO of Google.
This new structure will allow us to keep tremendous focus on the extraordinary opportunities we have inside of Google. A key part of this is Sundar Pichai. Sundar has been saying the things I would have said (and sometimes better!) for quite some time now, and I’ve been tremendously enjoying our work together. He has really stepped up since October of last year, when he took on product and engineering responsibility for our Internet businesses. 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. I have been spending quite a bit of time with Sundar, helping him and the company in any way I can, and I will of course continue to do that. Google itself is also making all sorts of new products, and I know Sundar will always be focused on innovation — continuing to stretch boundaries.
The message of a “slimmed down Google” is in this post several times and I get the impression that there will be some consolidating and maybe even some layoffs in the future for Google. Obviously this story is very much a work in progress and I expect we will see even more news in the coming weeks.