Google spawns new parent company, Alphabet, splits off side businesses into unique entities

Posted:
in General Discussion edited August 2015
Google on Monday announced a major corporate restructuring, including the creation of a new parent company, Alphabet, under which Google will be just one of several subsidiaries.

Image Credit: LA Times
Image Credit: LA Times


The new incarnation of Google will be "slimmed down," and see key executive Sundar Pichai promoted to the position of CEO, according to Google co-founder Larry Page, now in charge of Alphabet. Pichai has "really stepped up" since taking on new product and engineering responsibilities in October, Page said in a blog post, adding that the executive "has been saying the things I would have said (and sometimes better!) for quite some time now."

Businesses that were not previously a part of Google's core Internet products will move under the Alphabet umbrella. One given example is Calico, a medical research firm dedicated to extending human lifespans. Alphabet will also become the parent of entities like Nest, Fiber, the Google X research labs, and Google's Ventures and Capital investment firms.

Search, Maps, Android, YouTube and advertising will remain under Google's domain.

Page and fellow Google co-founder Sergey Brin, Alphabet's first president, have promised to "make sure each business is executing well," and set compensation for the new companies' CEOs.

The change also marks a radical shake-up for investors. All existing Google shares will automatically convert into Alphabet stock, and starting in the fourth quarter, Google results will be segmented away from those of the rest of Alphabet.

In explaining the changes, Page said that the goal is to make things "cleaner and more accountable." Despite the creation of Alphabet, each company will be granted a certain amount of independence and the ability to develop its own brands.

Monday's developments could potentially have ramifications for Apple, which has been competing with a unified Google in terms of mobile platforms, advertising, music services, and more. Alphabet's subsidiaries could, for instance, decide to go in different development directions.
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Comments

  • Reply 1 of 190
    Welp, I was feeling pretty good about AAPL recovering 4 points today until I saw that GOOG was up over 40 points in after hours, on the news of this.
  • Reply 2 of 190
    prokipprokip Posts: 172member
    Who cares !!
  • Reply 3 of 190
    Mmm ...

    Aoogle ... Zoogle ...

    Then come the superscripts and subscripts.
  • Reply 4 of 190
    rogifanrogifan Posts: 10,669member
    applesway wrote: »
    Welp, I was feeling pretty good about AAPL recovering 4 points today until I saw that GOOG was up over 40 points in after hours, on the news of this.

    Let's see where it ends up tomorrow.

    I have to laugh though that Page talks about focus when this seems like anything but that. I do think this could put more pressure on Apple to use its cash pile for moonshot type stuff. Some Wall Street types will be calling for Apple's version of Google X.
  • Reply 5 of 190
    boredumbboredumb Posts: 1,418member

    What a tiny car - not even room for a search engine.

  • Reply 6 of 190
    cpsrocpsro Posts: 3,062member

    This move is called "shuck and jive".

     

    NO coincidence about the similarity between Apple/AAPL and Alphabet.

  • Reply 7 of 190

    Maybe AAPL could get a quick, inexplicable 7% after-market jump by creating a new parent company as well (Fruitbasket?  Cobbler?  Orchard?).

     

    I'll never understand GOOG or AMZN investors.

  • Reply 8 of 190
    asciiascii Posts: 5,936member
    If you turn one of the b's upside down in Alphabet you can write "Apple hat" or "tha Apple" :)
  • Reply 9 of 190
    This may not be such a dumb strategy. Look at the market reaction after hours. It can change incentives within the company quite dramatically, and people are more directly held accountable for their successes or failures.

    As I have said before, given its size and increasing complexity, Apple may need to consider doing something similar soon: hardware + software + services. Or, hardware + ecosystem.
  • Reply 10 of 190
    e1618978e1618978 Posts: 6,075member
    Quote:

    Originally Posted by RedHotFuzz View Post

     

    Maybe AAPL could get a quick, inexplicable 7% after-market jump by creating a new parent company as well (Fruitbasket?  Cobbler?  Orchard?).






    Apple could get a 100% after market jump if FruitBasket was in the Cayman Islands.   Apple US shareholders could be converted to ADR holders, and the US business would be a subsidiary of the parent company (giving the US government no claim at all on worldwide income).  8-)

  • Reply 11 of 190
    Alphabet? Should have called it Evilcorp.

    Mr. Robot
  • Reply 12 of 190

    It seems to prove that Google's management is much smarter than Apple's management.  Apple has poured tens of billions of dollars into share repurchases and all it has done is driven Apple's share price into the toilet and lost the company $120 billion in market cap.  Everything that Apple does only makes the share price go lower.  Google does a simple company restructure and assigns new CEOs and a president and the share price shoots up 6% and $20 billion in market cap overnight.  Why is it that Apple can't figure out how to do anything to increase the value of the company when other companies can do it so easily.  Google's $20 billion gain in market cap is like free cash.  It's not as if it increased revenue or profits.  The only cost was the cost of restructuring the company which might have cost a couple of million dollars tops.  On the other hand, Apple is spending money to lose money and that doesn't help shareholders at all.  You watch Google's P/E go up to around 50 while Apple's P/E drops even further down.  Eventually, Google's market cap will exceed Apple's market cap while only taking in a fraction of Apple's revenue and profits.  Google is playing to win value while Apple is playing to lose value.  That's a real bitch-slap to Apple shareholders.

  • Reply 13 of 190
    Not sure why it makes sense to keep Android inside a search engine company when they could be spun off into its own independent subsidiary and have nothing to do with search. After all, Google makes more ad revenue off PCs and iOS devices. Unless of course, an independent Android, Inc. wouldn't generate any licensing revenue, and always show a net loss.
  • Reply 14 of 190
    Quote:

    Originally Posted by Steffen Jobbs View Post

     

    It seems to prove that Google's management is much smarter than Apple's management.


     

    On the contrary, GOOG investors are far less critical than AAPL investors.  Sergey could have his hair dyed red and the stock would jump 5%.  Apple misses analyst last-minute predictions by 5 units sold and the stock plunges 10%.  This is how it always has been.

     

    If Tim announced a similar "Alphabetizing" of the company, you can bet the analysts & investors would see pending disaster and run for the exits.

     

    AAPL has never traded rationally.

  • Reply 15 of 190
    tallest skiltallest skil Posts: 43,388member
    Originally Posted by Steffen Jobbs View Post

    It seems to prove that Google's management is much smarter than Apple's management.  Apple has poured tens of billions of dollars into share repurchases and all it has done is driven Apple's share price into the toilet and lost the company $120 billion in market cap.  Everything that Apple does only makes the share price go lower.  Google does a simple company restructure and assigns new CEOs and a president and the share price shoots up 6% and $20 billion in market cap overnight.  Why is it that Apple can't figure out how to do anything to increase the value of the company when other companies can do it so easily.  Google's $20 billion gain in market cap is like free cash.  It's not as if it increased revenue or profits.  The only cost was the cost of restructuring the company which might have cost a couple of million dollars tops.  On the other hand, Apple is spending money to lose money and that doesn't help shareholders at all.  You watch Google's P/E go up to around 50 while Apple's P/E drops even further down.  Eventually, Google's market cap will exceed Apple's market cap while only taking in a fraction of Apple's revenue and profits.  Google is playing to win value while Apple is playing to lose value.  That's a real bitch-slap to Apple shareholders.



    @Slurpy, do you want to take this one? :p I’ll start.

     

    Why is it that Apple can't figure out how to do anything to increase the value of the company when other companies can do it so easily.


     

    Because Apple prefers to make moves that create actual value, not masturbatory nonsense for day-traders.

  • Reply 16 of 190
    gatorguygatorguy Posts: 23,510member
    rogifan wrote: »
    Let's see where it ends up tomorrow.

    I have to laugh though that Page talks about focus when this seems like anything but that. .
    I would disagree. IMO it should make the individual companies much more focused. Now their leadership can concentrate solely on their own businesses, succeed or fail on their own merits. The chances of the various companies being successful enterprises in their own right just went up with the new accountability and opportunities for recognition (and compensation!). I think it will be seen as a brilliant move, thus the excitement from investors.
  • Reply 17 of 190
    Willie said it best ...

    Here ya' go:


    [VIDEO]
  • Reply 18 of 190
    Where does Eric The Schmidt fit into all this?
  • Reply 19 of 190

    Because Apple prefers to make moves that create actual value, not masturbatory nonsense for day-traders.

    Wish I'd said that!
  • Reply 20 of 190
    jungmarkjungmark Posts: 6,924member
    It seems to prove that Google's management is much smarter than Apple's management.  Apple has poured tens of billions of dollars into share repurchases and all it has done is driven Apple's share price into the toilet and lost the company $120 billion in market cap.  Everything that Apple does only makes the share price go lower.  Google does a simple company restructure and assigns new CEOs and a president and the share price shoots up 6% and $20 billion in market cap overnight.  Why is it that Apple can't figure out how to do anything to increase the value of the company when other companies can do it so easily.  Google's $20 billion gain in market cap is like free cash.  It's not as if it increased revenue or profits.  The only cost was the cost of restructuring the company which might have cost a couple of million dollars tops.  On the other hand, Apple is spending money to lose money and that doesn't help shareholders at all.  You watch Google's P/E go up to around 50 while Apple's P/E drops even further down.  Eventually, Google's market cap will exceed Apple's market cap while only taking in a fraction of Apple's revenue and profits.  Google is playing to win value while Apple is playing to lose value.  That's a real bitch-slap to Apple shareholders.
    Just sell your stock.

    Wall Street doesn't understand Apple.
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