google-alphabet

First up: this is not a joke.

Google is now becoming a part of a holding company called Alphabet, which will have Larry Page as CEO and Sergey Brin as President. Sundar Pichai will now be the CEO of Google. Both Microsoft and Google now have Indian-born CEOs. Eric Schmidt will become Executive Chairman of Alphabet.

Pichai joined Google in 2004, and, prior to his current role, served as Google’s SVP of Android, Chrome and Apps.  Sundar has a B.Tech. (Hons.) from the Indian Institute of Technology Kharagpur, a M.S. from Stanford University, and an MBA from The Wharton School of the University of Pennsylvania.

Read a Q&A with Pichai when he was in India last year, where he talks about developing for mobile, Voice & Google Now, standardization of Android

The lowdown

1. Why is this happening?

a. Addressing possible future anti-trust issues: Google is a conglomerate and its scale is such that it is involved in many projects which are leading in their own segment (Search, Maps, YouTube, Chrome, Android), some of which are facing anti-trust challenges: there was always search, and now Android is also being investigated in the European Union. While at present these businesses will remain a part of Google, in case there is any anti-trust action pushing for the split of Google into separate companies, it will allow Alphabet to neatly fit these businesses under the Alphabet umbrella as independent businesses, and even say that that was always a part of the plan.

Note that there are potential anti-trust issues being investigated with Google search in India, and a report is expected shortly.

b.  More freedom to grow each project separately: Page says in his blog post, that companies tend to get comfortable with doing the same thing and just making incremental changes, and “in the technology industry, where revolutionary ideas drive the next big growth areas, you need to be a bit uncomfortable to stay relevant.”

2. Which projects are a part of Alphabet?

So far, the website hasn’t got enough information, but Page’s blog post suggests that, for now, Alphabet includes:

– Life Sciences (that works on the glucose-sensing contact lens)
– Calico (focused on longevity)
– Google X lab, “which incubates new efforts like Wing, our drone delivery effort”.
– The investment arms: Google Ventures and Google Capital
– Nest

3. Which projects are a part of Google?

– search
– ads
– maps
– apps
– YouTube
– Android

4. How will this work?

There will be a CEO for each business, with Brin and Page handling capital allocation and working to make sure each business is executing well. In terms of quarterly disclosures, Google financials will be provided separately from those of the rest of the Alphabet businesses.

 

The company says: “Alphabet Inc. will replace Google Inc. 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. Our two classes of shares will continue to trade on Nasdaq as GOOGL and GOOG.”

Changes in roles

– Larry Page will become the Chief Executive Officer (CEO) of Alphabet
– Sergey Brin will become the President of Alphabet
– Eric E. Schmidt will become the Executive Chairman of Alphabet
– Ruth Porat will become the Senior Vice President and Chief Financial Officer (CFO) of Alphabet and CFO of Google
– David C. Drummond will become the Senior Vice President, Corporate Development, Chief Legal Officer and Secretary of Alphabet
– Omid Kordestani will transition from his role as Google’s Chief Business Officer to become an Advisor to Alphabet and Google.