Alphabet: A Major Overhaul of Google’s Corporate Structure

The company we knew as Google is now a subsidiary of a larger parent company called ‘Alphabet’. CEO and cofounder Larry Page renamed and reorganized the business as part of a massive overhaul of his organisation’s structure.

Other subsidiaries of Alphabet include Calico, Fiber, Google Ventures, Google Capital, Google X, Life Sciences, and Nest. And within the Google subsidiary are YouTube, Android, Search, Ads, Maps, and Apps.

The company, which was founded in 1998 and went public in 2004, announced the reorganisation in a blog post called ‘G is for Google.’

Executives Larry Page (CEO), Sergey Brin (President), Eric Schmidt (Chairman), Ruth Porat (CFO), and David Drummond (Chief Counsel) will remain in charge of Alphabet. Sundar Pichai (who has been running Google for the past year) is now CEO of the Google subsidiary.

In his press release, Page set out the following priorities for Alphabet:

  • Getting more ambitious things done
  • Taking the long-term view
  • Empowering great entrepreneurs and companies to flourish
  • Investing at the scale of the opportunities and resources we see
  • Improving the transparency and oversight of what we’re doing
  • Making Google even better through greater focus
  • Improving the lives of as many people as we can

The reorganisation results in Alphabet owning all of Google’s capital stock. Shareholders will automatically receive one Alphabet share for each Google share they owned, with identical designations, rights, powers, preferences, qualifications, limitations and restrictions.

The company earns almost US$70 billion in annual revenue and has a market capitalisation of over US$450 billion.

However, Google is currently the only part of Alphabet that is currently profitable. Calico is just getting started, and the experimental X Labs (creators of Wing, a drone delivery system) is inherently unprofitable.

Many analysts agree that Google’s restructure makes sense. They’ve been increasingly shifting into new areas that bear little relationship to their original goal of organising the Internet’s information. For example, in 2013, Google launched Calico, a business focused on longevity and curing death.

The new stand-alone companies will enjoy greater freedom to invest in experimental projects such as driverless cars, without investors complaining about Google wasting time and energy on unprofitable ventures. Breaking the organisation into a collection of smaller groups gives Alphabet the freedom to innovate without financial constraints.

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