WATCH: One of the most recognizable brands in the world is getting a new name and structure. Google is building a new parent company – and splitting off some of its subsidiaries. Google says it’s committed to its core business as an Internet search firm. So why make a change? Turns out there are plenty of hidden reasons and potential benefits for the high-tech giant. Mike Armstrong reports.
Google Inc. announced a radically different operating structure on Monday under a new holding company called Alphabet Inc.
The move will separate its well-known web companies like its search engine, YouTube, and Chrome from its research and investment divisions.
The Internet giant made the surprise announcement in a blog post after the stock markets closed Monday.
Larry Page, Google’s co-founder, said that Alphabet Inc. will replace Google as the publicly-traded entity. All shares of Google will be converted into the same number of shares of Alphabet, which will continue to trade under the stock ticker symbols GOOG and GOOGL.
WATCH: Tech reporter Nicole Bogart explains Google’s decision
“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,” Page said in a blogpost.
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“This new structure will allow us to keep tremendous focus on the extraordinary opportunities we have inside of Google.”
Alphabet will include the main Google businesses such as search, Android and YouTube, along with businesses managed separately such as Fiber, the company’s broadband arm, X lab and Wing, its drone delivery project, and investing arms like Google Ventures.
Other businesses that will operate separately under the Alphabet umbrella include Calico, which Google established to conduct health research in 2013 and Nest, which Google acquired in 2014. Alphabet will also oversee Google Ventures and Google Capital, two corporate investment entities that focus on early- and growth-stage startups.
The new changes will leave Page in charge of Alphabet as CEO, while fellow co-founder Sergey Brin will become president of Alphabet, and Eric Schmidt will be executive chairman.
WATCH: Google co-founder Larry Page said in a blog post Monday that the Internet giant is now under a parent company called Alphabet. Internet-centric services, such as Chrome and YouTube, will remain under Google, while Alphabet is set to be more focused on technological innovations and advances. Ian Sherr explains.
Sundar Pichai will be the CEO of Google Inc., while current Google Chief Financial Officer Ruth Porat will become CFO of Alphabet. Google said its chief financial officer, Ruth Porat, will hold the same title for both Google and Alphabet.
Analysts said the move may also be a nod to Wall Street demands for more fiscal accountability: As part of the reorganization, Page said the company will begin reporting financial results by segments. That should give a clearer picture of how Google’s core Internet business is performing, separate from other ventures, said analyst Colin Gillis of the investment firm BGC Partners.
“They promised to give us more information,” Gillis said. “Now we’ll get a chance to see.”
Google reported more than $14 billion in profit on $66 billion in sales last year, most of it from lucrative Internet advertising, while other ventures have required large investments without showing immediate returns. The company’s stock has surged in recent weeks after a new chief financial officer announced other moves to rein in corporate spending.
Both classes of the Mountain View, California, company’s stock rose more than six per cent in after-hours trading following the announcement Monday afternoon.
– With files from The Associated Press