"G is for Google." That comes from Larry Page, the CEO of a new holding company called Alphabet that will own Google, X lab, Wing, Nest, Google Fiber, Life Sciences, and whatever the autonomous vehicle company will be called.
The move is essentially a restructuring of the company we know as "Google" today—Larry Page will be CEO of Alphabet, while Sergey Brin will be president, and Eric Schmidt will be executive chairman. Shares of GOOG and GOOGL will be turned into shares of Alphabet, with all the same rights (and lack of rights), and will continue trading under those symbols.
The new company, however, will have its own website at abc.xyz. (Alphabet.com is already taken by a fleet management company owned by BMW.)
The most important aspect of this change is that each company owned by Alphabet will be operated independently and have its own CEO. That includes Google itself, which will now be headed by Sindar Pichai, whom The Guardian referred to as a "rising star in Silicon Valley." Mr. Pichai was formerly in charge of product and engineering at the old Google.
Clear as Mud
Google's finances will also "be provided separately than those for the rest of Alphabet businesses as a whole." Mainstream reaction to this has been to assume this means greater transparency in Google's operations, but if anything this new structure for Google/Alphabet offers the potential for even tighter control over information.
Color me doubtful that Google's founders would voluntarily or deliberately do anything that forced them to be more transparent. The company's founding principle, after all, is that it thinks differently about such things. Larry Page made that pretty clear in the opening to the blog post announcing the change:
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.
That was a reminder that Google—err...Alphabet—plays by its own rules, will do what Messrs. Page, Brin, and Schmidt please, and that investors will like it. While there is little doubt that there will be some additional transparency and clarity in Alphabet's finances, this restructuring will, if anything, allow the company's various far flung operations to achieve even greater secrecy.
Remember, this is the same team than created a new class of non-voting Google shares—GOOGL—that would free the founders from having to worry about those pesky shareholders having a say in their doings.
And there's surely nothing wrong with that. Google has thrived by making many and varied bets, both big and small, in all manner of areas that have diddly to do with search. Most have failed, but the ones that have succeeded have done so fabulously. Investors have been rewarded handsomely, and will most likely continued to be rewarded handsomely...
...as long as they are content to let the Three Amigos* do whatever it is they want to do. And what they want to do is create.
"Sergey and I are seriously in the business of starting new things," Mr. Page wrote in his blog post. Not being responsible for day to day operations at Google or any of the other wholly-owned subsidiary companies frees them up to do so.
*Whither Eric?
One last note: Eric Schmidt wasn't mentioned in the blog post. It was all "Me and Serge, yo, we're like total BFFs. Like, for serious ya'll."
- "Sergey and I"
- "...my capable partner, Sergey"
- "Sergey and me"
- "Sergey and I"
- "Sergey and I"
- "Sergey and me"
And Eric Schmidt, the man brought in to offer "adult supervision" to two young grad students out to change the world? Well, he remains executive chairman, but he didn't even get a cameo in Larry Page's blog post.
I'm not trying to make hay out of that—necessarily—but I found it interesting. Eric Schmidt played an enormous role in making Google into the monstrosity that it is today. You would think he could get at least a shoutout in the Alphabet announcement.
Image made with help from Shutterstock.