Alphabet soup: What Google’s reorganization means

Alphabet soup: What Google’s reorganization means
Google executives announced Monday that the Company Formerly Known as Google was rebranding and reorganizing itself into a fundamentally different structure.

Google executives announced Monday that the Company Formerly Known as Google was rebranding and reorganizing itself into a fundamentally different structure. From this point forward, Google — by which we mean a specific segment of the businesses currently operated under the Google brand — will be considered a subsidiary of a new company, named Alphabet. Alphabet, according to former Google CEO Larry Page (more on that in a moment) is a collection of companies, of which Google is just one.

The other companies that make up Alphabet are many of the experimental and project concepts that Google is famous for launching and occasionally killing. Page lists Life Sciences and Calico as two projects that will now belong to Alphabet, along with its experimental X labs. A Form-8K filing expands on this somewhat — projects now grouped under Alphabet include Calico, Nest, Fiber, Google’s Capital and Venture programs, and the aforementioned Google X. The core components of Google, like Search, Ads, Maps, Apps, Android, and YouTube, will all remain as Google products, as will Chrome.

Google’s new CEO, Sundar Pinchai

At its simplest, what Google has done is classify the primary income-generating section of the business as “Google” and spun everything else off into its own division. Brin and Page are moving from Google over to Alphabet — Page will be the company CEO, while Sergey Brin serves as its president. Google executive Sundar Pinchai has been promoted to the CEO role and will lead Google’s operations. All Google stock has been converted to Alphabet stock, and there’s no change in intrinsic valuation or any other issue that would impact the value of a previous stock purchase (other than a healthy kick to the underlying stock price since Google announced the move, anyway).

So far, it seems as though this move is designed to give Brin and Page the opportunity to work on projects and concepts that they’ve wanted to pursue, while Google focuses on the core components of its business that produce the day-to-day capital. Google isn’t giving up on its pursuit of crazy ideas or wacky concept products. But it’s now explicitly organized in such a way that makes it clear that search, ads, and video, while vital to the company’s income, is just one aspect of its total portfolio. Page seems to see Alphabet as a sort of product incubator: “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.”

If you’re concerned about whether or not Google’s iconic homepage or approach to delivering Android or other software products will change, you shouldn’t be — things will remain business-as-usual at the search giant from this point forward, with no plans to make major changes to Google’s core products and services. No mention was made of whether or not Google Plus is considered a core service, an Alphabet spinoff, or a fragment of a dream that neither company particularly wants. The fact that Google didn’t even bother naming its own social network one way or another could be read as its own statement on the perceived value of that aspect of the company.