Google Founders Reorganize Corporate Structure Under Alphabet

How big is too big? When the supertanker can no longer be agile, maybe it’s time to create a large fleet of swifter vessels. (Being the swifter vessel is an advantage MSPs often enjoy in a marketplace of larger operators.)

Google (GOOG) founder Larry Page has announced in a blog post today that he and his co-founder Sergey Brin have formed a new company called Alphabet that will serve as a holding company for the organization’s many companies and initiatives. The operating company Google will be the largest company in this portfolio structure. Sundar Pichai who has led product and engineering since October 2014 will serve as Google’s CEO.

Covering the announcement, the New York Times compared Alphabet’s structure to that of Warren Buffet’s Berkshire Hathaway, a giant conglomerate that is operated as a holding company designed to give its operating companies more rein to be independent and entrepreneurial even within a corporate giant.

Why Alphabet?

So what about the name Alphabet?

“We 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 of how we index with Google search,” Page wrote. “We also like that it means alpha‑bet (Alpha is investment return above benchmark), which we strive for!

“I should add that 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,” he wrote.

Other operating companies under the Alphabet umbrella include Life Sciences, a company that works on the glucose-sensing contact lens and Calico, a company focused on longevity. Alphabet will also include X lab, an incubator for projects such as Wing, the company’s drone delivery effort. And Page said the new structure will also enable the company to grow its investment arms, Ventures and Capital.

New financial reporting structure, too

“Fundamentally, we believe this allows us more management scale, as we can run things independently that aren’t very related,” Page said in his blog post.

Each business will get its own CEO. Page said Google financials will be reported separately from those from the rest of the Alphabet businesses

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, Page said. Its two classes of shares will continue to trade on Nasdaq as GOOGL and GOOG.