Google disclosed its intention to create a new public holding company called Alphabet in a regulatory filing with the Securities and Exchange Commission (SEC) on Monday, August 10.
The search engine giant also revealed a new operating structure to improve its management scale and focus on its consolidated business.
Google new operating structure, reorganization
Under the new operating structure, Google’s main business will include search, ads, apps, maps, YouTube, Android, and other related technical infrastructure.
Google’s other businesses such as Calico, Fiber, Nest, investment units such as Google Ventures and Google Capital as well as its incubator projects such as Google X will be managed separately.
The search engine giant intends to implement the holding company reorganization later this year. All of Google shares will automatically convert to the equivalent number of Alphabet shares following the reorganization.
The Alphabet shares will still trade on NASDAQ under the same symbols GOOGL and GOOG. The shares will have the same designations, rights, powers, preferences, qualifications, limitations and restrictions. The current Google shareholders will become Alphabet shareholders after the reorganization.
Larry Page will become CEO, Sergey Brin will become President, and Eric Schmidt will become Chairman of Alphabet following the completion of the reorganization.
Senior vice presidents Ruth Porat and David Drummond will also transition to Alphabet. Both executives will retain their positions as chief financial officer and chief legal officer, respectively.
The board of directors of Google will also transition to Alphabet and serve the same positions following the completion of the reorganization.
Sundar Pichai will become the new CEO of Google
Google will operate as a subsidiary of Alphabet. Sundar Pichai will become the new CEO of the search engine giant. Ms. Porat will also continue to serve as its CFO.
The search engine giant plants to introduce its new legal and operating structure over the next few months. Google expects to provide segment reporting for financial results. Google’s financial results will be reported separately from the rest of all the businesses under Alphabet.
In a blog post, Google CEO Larry Page explained that the new operating structure aims to have a strong CEO running each business. He and Mr. Brin will help the CEOs of the businesses as needed.
According to Mr. Page, 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,” explained Page.
When it comes to the appointment of Pichai as Google CEO, Mr. Page said, “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.”
Furthermore, Mr Page said they liked the name Alphabet because it “means a collection of letters that represent language, one of humanity’s most important innovations and is the core how we index with Google search!”
They also like the fact the other meaning of alpha-bet (Alpha is investment return above benchmark).
Mr. Page also pointed out that they have no intention to make Alphabet as a big consumer brand with related products. He said their entire point of the reorganization is for Alphabet companies to run independently and develop its own brands.
