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

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  • Reply 121 of 190
    SpamSandwichSpamSandwich Posts: 33,407member
    This is a great move by Google.  It is proven that smaller independent companies are more innovative and drive better net results...if they truly allow such autonomy then this could be effective.  Time will tell.

    It's putting the pressure on the individual spin offs to become profitable (theoretically). However, the real effect may simply be to illustrate how many profit-stealing, money-losing operations in which they are involved. You cannot have businesses whose sole product is R&D. Each business needs to be making profits in order to in turn devote resources to research which would increase competitiveness. They've been running these other divisions as if money didn't matter. Now it's becoming a real concern.
  • Reply 122 of 190
    gatorguygatorguy Posts: 24,176member
    It's putting the pressure on the individual spin offs to become profitable (theoretically). However, the real effect may simply be to illustrate how many profit-stealing, money-losing operations in which they are involved. You cannot have businesses whose sole product is R&D. Each business needs to be making profits in order to in turn devote resources to research which would increase competitiveness. They've been running these other divisions as if money didn't matter. Now it's becoming a real concern.
    So in your opinion they're doing just what they should for their investors? Give them better transparency on "where the money goes"?
  • Reply 123 of 190
    tmaytmay Posts: 6,311member
    Quote:
    Originally Posted by Gatorguy View Post





    No, it's certainly not a better explanation. In fact it doesn't really say much at all (and what it does is a bit confusing) except for the authors opinion that nothing really changes.

    I suspected that you wouldn't find it to you taste.

     

     

    Quote:

    Originally Posted by Gatorguy View Post





    No, it's certainly not a better explanation. In fact it doesn't really say much at all (and what it does is a bit confusing) except for the authors opinion that nothing really changes.



    Horace, who really is a smart guy, doesn't like Google very much on a personal level but he does like Apple... a LOT. Nothing at all wrong with being a fan.

    Still, his data interpretation skills are class leading. He likes Apple because Apple is a "Black Swan" that defies conventional disruption theory, and he has been studying disruption theory for a very long time.

  • Reply 124 of 190
    gatorguygatorguy Posts: 24,176member
    tmay wrote: »
    Still, his data interpretation skills are class leading. He likes Apple because Apple is a "Black Swan" that defies conventional disruption theory, and he has been studying disruption theory for a very long time.
    Yes he understands numbers. The link you offered doesn't have any tho.
  • Reply 125 of 190
    tmaytmay Posts: 6,311member
    Quote:

    Originally Posted by Gatorguy View Post





    Yes he understands numbers. The link you offered doesn't have any tho.

    His blog has lots of posts with data. My guess is that he will follow up with data/charts to emphasize his argument.

     

    He doesn't see this as "brilliant". Your mileage varied.

  • Reply 126 of 190
    SpamSandwichSpamSandwich Posts: 33,407member
    gatorguy wrote: »
    So in your opinion they're doing just what they should for their investors? Give them better transparency on "where the money goes"?

    In part, Brin and Page have given up on the boring job of running Google, their baby. In another sense, they've seen the 'end is nigh' for the search business and are just preparing for the inevitable. The most positive spin I have is that they've done breakthrough work on artificial intelligence and will be applying it to all of the divisions, which will benefit enormously. ;)
  • Reply 127 of 190
    gatorguygatorguy Posts: 24,176member
    tmay wrote: »
    I suspected that you wouldn't find it to you taste.
    Not being obtuse at all but what did you learn about the restructuring, how it will be done, what companies will be broken out, how the financial reporting will be handled, from Horace's article?
  • Reply 128 of 190
    gatorguygatorguy Posts: 24,176member
    In part, Brin and Page have given up on the boring job of running Google, their baby. In another sense, they've seen the 'end is nigh' for the search business and are just preparing for the inevitable. The most positive spin I have is that they've done breakthrough work on artificial intelligence and will be applying it to all of the divisions, which will benefit enormously. ;)

    That's all nice of course, but back to the question I had asked you. Will this serve the investors better, giving them more insight into the business? Is this the right move for them?
  • Reply 129 of 190
    SpamSandwichSpamSandwich Posts: 33,407member
    gatorguy wrote: »
    That's all nice of course. But will this serve the investors better, giving them more insight into the business?

    I don't think so. Investors retain all of the same voting rights as before and no additional disclosures have been touted, so no improvements for them.

    It's entirely possible that these changes were demanded by upper level management concerned about the number of distractions the Google Boys were involved in and they wanted clarity between businesses.
  • Reply 130 of 190
    MacProMacPro Posts: 19,718member
    If there's one thing that has characterized Google it is the ADHA focus of the management for the last 20 years. Why should that change now? The next "shiney" to come along and it's off to the races... I can understand why this restructuring is happening: Google's patent on search is about to expire and one of these other entities are to pick up the profit slack that's going to befall Google. However, I don't see any of the wild-assed ideas that's the mainstay of the other business units replacing the search income... Google may be a three-ring circus with too many clowns, but it's still a one-trick pony show...

    And that one trick pony is pretty much owned by Apple, the market for their ads on iOS and OS X.
  • Reply 131 of 190
    gatorguy wrote: »
    If that's what they are trying to do they would have left things as they are. Separating the elements into separate companies is going to make it a lot harder to hide anything from investors, not easier. The now smaller and more focused Google will report their own specific results. Calico? Fiber? Nest? Those will no longer be hidden under the overall Google revenue figures and will report results separately.

    So there will be more transparency, not less.

    I agree with this assessment. There is an old adage in finance that "an option on a portfolio will be worth less than a portfolio of options." This is exactly what's happening here, and why the market reaction is so positive.

    But everything depends on how they execute this strategy.

    It is pretty amazing to see that stock up neatly $40 (pre-market) on a day the market will be down significantly.
  • Reply 132 of 190
    tmaytmay Posts: 6,311member
    Quote:
    Originally Posted by Gatorguy View Post





    Not being obtuse at all but what did you learn about the restructuring, how it will be done, what companies will be broken out, how the financial reporting will be handled, from Horace's article?

    Horace:

     

    "For the last few years, I’ve been proposing that the way to conceptualize Google is as two separate entities: Google A and Google B.

    Roughly speaking Google A was the R&D[1] organization and Google B was SG&A[2]. You can find the operating expenses of running each of these organizations in the company’s income statement.  In the last quarter R&D was about $2.8 billion and SG&A was about $3.5 billion[3]. The two entities are further distinguished as follows:


    • Google A was led by Eric Schmidt and Larry Page and Google B was led by persons unknown, but mostly represented by the “Chief Business Officer” Omid Kordestani.

    • Google A spends money. Google B collects money.

    • Google B sends a check to Google A while Google A sends data to Google B (which then sells it on to advertisers and collects money).

    • Google A communicates frequently with optimism and enthusiasm about the future. Google B remains quiet.

    • Google A solves problems of humanity, Google B solves problems for advertisers.

    • Google A has users, Google B has customers (to whom it sells users."

    Horace is explaining in the above his take on the previous structure of Google. Obviously, he completes his discussion in the linked post.

     

    Do you find that financial details make that easier to understand? I don't think those details are all that relevant to the point of the post, which is the "why" of the restructuring.

  • Reply 133 of 190
    gatorguygatorguy Posts: 24,176member
    tmay wrote: »
    "For the last few years, I’ve been proposing that the way to conceptualize Google is as two separate entities: Google A and Google B. etc....
    Horace is explaining in the above his take on the previous structure of Google. Obviously, he completes his discussion in the linked post.

    Do you find that financial details make that easier to understand? I don't think those details are all that relevant to the point of the post, which is the "why" of the restructuring.
    The "why' is quite obviously because the investors were demanding better transparency, with the added benefit of making the individual companies more accountable while removing some distractions from Google's core business.

    Horace didn't give a "why" from a numbers or investor vantage point. He also betrayed his inability to look at it unemotionally when he said Google A was giving data to Google B to sell. He knows they don't do that, but says it anyway as it helps him cast Google's restructure in a poor light which seems to be the point of his blog post.

    No the average reader won't learn much from your link IMHO. There's far better explanations for the casual reader who has no idea what Alphabet is and how it will be structured, one of them being the WSJ article I pointed you to.

    Now if the takeaway you'd prefer is to be dismissive of the whole thing Horace is a fine read. it won't tell you more than you'd like to hear.
  • Reply 134 of 190
    SpamSandwichSpamSandwich Posts: 33,407member
    gatorguy wrote: »
    The "why' is quite obviously because the investors were demanding better transparency, with the added benefit of making the individual companies more accountable. Horace didn't give a "why". He also betrayed his inability to look at it unemotionally when he said Google A was giving data to Google B to sell. He knows they don't do that but it helps him cast Google in a poor light which seems to be the point of his blog post.

    No the average reader won't learn much from your link IMHO. There's far better explanations for the casual reader who has no idea what Alphabet is and how it will be structured, one of them being the WSJ article I pointed you to.

    Now if the takeaway you'd prefer is to be dismissive of the whole thing Horace is a fine read. it won't tell you more than you'd like to hear.

    Investors are allowed class-C shares in Google and cannot influence the company. The Google Boys structured everything so they'd retain all control over the company in all circumstances. It even looks like Eric Schmidt got a bit of a demotion in their announcement.
  • Reply 135 of 190

    It's entirely possible that these changes were demanded by upper level management concerned about the number of distractions the Google Boys were involved in and they wanted clarity between businesses.

    If that alone is the case, it's a good thing for investors then.

    I have historically had my issues with Google as a company, its ethos, the analysts' overreaction to their ability to innovate etc., but sometimes, when and if warranted, you have to acknowledge that they did a smart thing. In this instance, regardless of what the numerous market conspiracy theory commentators here think (and regardless of the knee-jerk responses about Google-evil etc), they appear to have done something that structurally puts them in a position to be no worse, but possibly better, than they were before. And the market has reacted enthusiastically to that. Think of it as an 'opacity discount' that has been lifted.
  • Reply 136 of 190
    Alphabet, Inc.'s motto:

    Don't Be Demonic
  • Reply 137 of 190
    SpamSandwichSpamSandwich Posts: 33,407member
    If that alone is the case, it's a good thing for investors then.

    I have historically had my issues with Google as a company, its ethos, the analysts' overreaction to their ability to innovate etc., but sometimes, when and if warranted, you have to acknowledge that they did a smart thing. In this instance, regardless of what the numerous market conspiracy theory commentators here think (and regardless of the knee-jerk responses about Google-evil etc), they appear to have done something that structurally puts them in a position to be no worse, but possibly better, than they were before. And the market has reacted enthusiastically to that. Think of it as an 'opacity discount' that has been lifted.

    I don't think the clarity necessarily travels beyond the doors of GoogleAlphabet. No improvements as far as financial reporting have been made, have they? I'm not qualified to dissect their SEC information.
  • Reply 138 of 190
    gatorguy wrote: »
    Goldman Sachs believes the Apple Watch is failing sales expectations too. You really think their estimates are pretty accurate?

    EDIT: I realized how jaded by big numbers some folks have become to use the word "only" when discussing $3B revenue. Who here would be unhappy having $3B?

    The difference with the Apple Watch is its potential. It may be off to a slow start but it has vast potential for growth and it has only been available for a few months. Once native third party apps are available the sky is the limit. Whereas Android is pretty much at its zenith.
  • Reply 139 of 190
    SpamSandwichSpamSandwich Posts: 33,407member
    isteelers wrote: »
    The difference with the Apple Watch is its potential. It may be off to a slow start but it has vast potential for growth and it has only been available for a few months. Once native third party apps are available the sky is the limit. Whereas Android is pretty much at its zenith.

    Wrong thread. This is about Google's restructuring.
  • Reply 140 of 190
    palominepalomine Posts: 362member
    According to the article, all existing Google shares will become Alphabet shares... What does that mean?

    If you have Google shares will they be tied to the profits of Alphabet only? Will investors like that?

    Which would be better-- owning shares in a company tied to the soon-to-expire advertising algorithm or owning shares in their Alphabet (soup) harebrained moneyless ventures?
    Both may be losers.

    I'm surprised investors aren't upset.

    Meanwhile, cue the end of the sucker's rally for AAPL.
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