Google announced Monday it is creating a new company called Alphabet that will serve as its parent company.
The tech giant said the newer Google is a bit slimmed down version, with a collection of companies that are “far afield” of its main internet products. Calico, a company focused on longevity and Google’s X lab, which helps develop new innovations like the company’s drone delivery system, Wing, will be part of Alphabet.
Larry Page, Google’s former CEO, will now run Alphabet as CEO with his partner Sergey Brin as president. Page has named Sundar Pichai the new CEO of Google.
According to Page, the pair believes this move allows them more management scale, so they can run things that aren’t related independently.
“As Sergey and I wrote in the original founders letter 11 years ago, ‘Google is not a conventional company. We do not intend to become one.’ As part of that, we also said that you could expect us to make ‘smaller bets in areas that might seem very speculative or even strange when compared to our current businesses.’ From the start, we’ve always strived to do more, and to do important and meaningful things with the resources we have” Page said.
Alphabet’s model is to have a strong CEO running each business that Brin and Page will assist, as needed. The pair will determine their compensation and will handle capital allocation and work to ensure each business is operating well.
With the new structure they also plan to implement segment reporting for their Q4 results, where Google financials will be provided separately from those for the rest of Alphabet businesses as a whole.
As part of this new effort, Alphabet Inc. will replace Google Inc. as the publicly-traded entity and all shares of Google will automatically change into the same number of shares of Alphabet, with the same rights as well. The two classes of shares will continue to trade on Nasdaq as GOOGL and GOOG.
Page said the birth of Alphabet is as a very exciting new chapter in Google’s life. The pair were fond of the name because it means a collection of letters that make up language, one of humanity’s most important inventions and, “Is the core of how we index with Google search.”
They also liked that it means alpha-bet, Alpha is investment return above benchmark, which the company strives for, Page said.
“We are not intending for this to be a big consumer brand with related products—the whole point is that Alphabet companies should have independence and develop their own brands,” Page said.