1 | "Our company is operating well today, but we think we can make it cleaner and more accountable," Google co-founder Larry Page said. |
2 | Google creates new company Alphabet, names new CEO "Our company is operating well today, but we think we can make it cleaner and more accountable," Google co-founder Larry Page said. |
3 | SAN FRANCISCO - In a major overhaul of how one of the world's most powerful technology companies does business, Google is creating a new publicly traded parent company called Alphabet Inc. that will be run by Google co-founders Larry Page and Sergey Brin. |
4 | Google will become a subsidiary of Alphabet and is getting a new CEO: top Google executive Sundar Pichai. |
5 | "Our company is operating well today, but we think we can make it cleaner and more accountable," Page wrote in a letter included in a regulatory filing on Monday afternoon. |
6 | Alphabet will be a "collection" of companies, the largest of which is Google, Page said. |
7 | But Google will be "slimmed down," excluding companies that are not part of its core Internet business. |
8 | For example, Google's foray into the life sciences with glucose sensing contact lenses and its focus on extending human life with Calico will not be part of Google. |
9 | But Google will still include the businesses that people typically associate with it such as search advertising, Android, YouTube, apps and so forth. |
10 | "Fundamentally, we believe this allows us more management scale, as we can run things independently that aren't very related," Page said. |
11 | Longtime Google observer Danny Sullivan saw the creation of the parent company as a positive move. |
12 | "I think this sets up Google to be a much more diversified company," Sullivan said. |
13 | "It certainly allows Google to expand its mission. ... It's an excellent way to have multiple companies underneath that run as independent entities." |
14 | Page is also making room for talented executives to move up in, rather than leave, Google, Sullivan said. |
15 | "It's a smart way to ensure that you can keep talented executives," he said. |
16 | Page will be CEO of Alphabet, Brin will be president and Eric Schmidt will be executive chairman. |
17 | Google's new chief financial officer Ruth Porat will become CFO of Alphabet and Google's current directors will become directors of Alphabet. |
18 | A "strong" CEO will run each of the Alphabet businesses with assistance from Page and Brin, Page said. |
19 | That includes Google which will be run by Pichai, Page's top lieutenant. |
20 | "We will rigorously handle capital allocation and work to make sure each business is executing well," Page said. |
21 | As part of the business reorganization, Alphabet will begin "segment" reporting for its fourth-quarter financial results. |
22 | Google financials will be broken out from the rest of the Alphabet businesses. |
23 | "This new structure will allow us to keep tremendous focus on the extraordinary opportunities we have inside of Google," Page said. |
24 | The news announced after the close of trading on Monday took Wall Street by surprise. |
25 | Google GOOG shares rose 6% in after-hours trading on Monday. |
26 | Google made the announcement after trading ended for the day. |
27 | Google will be a wholly owned subsidiary of Alphabet. |
28 | The two share classes will remain GOOGL and GOOG. |
29 | S&P Capital IQ analyst Scott Kessler says it sounds like Google is creating a holding company for its different brands and businesses. |
30 | "People want a better sense of what Google is and how it's performing, this is a way to do that," Kessler said. |
31 | Kessler also praised the pick of Pichai, who has been a rising star at the Internet, leading to speculation in recent years that he would eventually succeed Page as CEO. |
32 | "Sundar Pichai as CEO is big for a variety of reasons," Kessler said. |
33 | "I am sure he has been offered a number of things at other places. To keep him is key." |
34 | Page said Pichai was the natural choice to lead Google. |
35 | Sundar "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," Page said. |
36 | "I feel very fortunate to have someone as talented as him 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." |