Google creates Alphabet as its new holding company

Google has announced the separation of its search and advertising business, YouTube, and the Android and Chrome operating systems from its more experimental activities using a new corporate structure.

A holding company called Alphabet will manage the established businesses alongside separate companies for its other, less profitable activities, said CEO and founder Larry Page in a blog.

These include a myriad of initiatives including Nest, driverless cars, smart cities, health initiatives, fibre networks, drones and balloons.

Alphabet will be run by Page and co-founder Sergey Brin, who becomes president of the new holding company, alongside CFO Ruth Porat.

The new Google subsidiary will be led by Sundar Pichai, who is currently the company’s SVP of products.

Each of the other businesses within Alphabet will have their own CEOs, all reporting to Page and Brin.

The search giant argues the move will provide more visibility to investors. “Our company is operating well today, but we think we can make it cleaner and more accountable,” wrote Page in his blog.

On the other hand, some investors had become unhappy about how costs on more speculative business (the so-called moonshoots) were buried in the results.

The new structure also provides more autonomy for individual CEOs to build their businesses.

The company plans to introduce segment reporting in its Q4 results, where Google financials will be provided separately than those for the rest of Alphabet. However, this means only Google and Alphabet will disclose numbers, not any other individual businesses.

Alphabet will replace Google 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, which will trade under the existing stock tickers, Googl and Goog.

In another shift in responsibility, Omid Kordestani, Google’s current chief business officer, will act as an adviser to Alphabet. Tony Fadell, who runs Nest, will report directly to Page and Brin, and will lead hardware efforts.