News & Analysis

Google announces major restructure and the launch of parent company Alphabet

- August 11, 2015 2 MIN READ

Google has this morning announced a huge company restructure, launching its new holding company Alphabet. Google co-founders Sergey Brin and Larry Page will serve as President and CEO of Alphabet respectively, while Sundar Pichai, currently head of product at Google, has been appointed as Google CEO.

In a blog post explaining the news, Page said that while the company is operating well, the restructure will make the “slightly slimmed down Google” more accountable. He explained that Alphabet is a collection of companies, the largest of which is Google, with companies “pretty far afield” of Google’s main internet products shifted to Alphabet.

“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,” Page wrote.

The Google business will include things like search, ads, maps, Gmail, YouTube, Android, and the related tech infrastructure, while branches including its health and investment efforts, such as Ventures, will move to Alphabet. This will allow the subsidiary companies to continue to think big with experiments that turn out to be not quite as successful as they may originally have hoped – such as Google+ – without bringing the whole Google name or brand into the spotlight.

Google stock will also be shifted to Alphabet, though will still trade under GOOGL and GOOG. Shares rose by as much as 7 percent to $708 after the announcement.

Page also explained that the new name came about 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!”

He also stressed that the restructuring is not part of a move to create a huge consumer brand full of related products.

“The whole point is that Alphabet companies should have independence and develop their own brands,” he wrote.

The more cynical commentators have questioned whether the launch of Alphabet is just a clever way for Google to avoid paying the tax it should. Australia is just one of several countries that has criticised the internet giant over the last few years. Earlier this year, Treasurer Joe Hockey introducing new measures, dubbed ‘the Google tax’, aimed at multinational companies that use various corporate structures to avoid having a taxable presence in Australia. The European Union also filed formal anti-trust charges against Google in April, which could see the company face a $6 billion fine.

Image: new Google CEO Sundar Pichai. Source: Techsharx.