Google becomes Alphabet: Everything you need to know

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MOUNTAIN VIEW, CA- Google Inc. (NASDAQ: GOOG) The search giant is undergoing some major changes with the announcement of Alphabet, the new parent of Google itself and each one of its sub-companies.

Google has always been a search engine and advertising business at its core, but over all those years of success and booming profit, the company now has fingers in so many pies it was starting to confuse investors.

Today, nearly a couple of months after the shocking announcement, Google stated that it expects all stocks from “Google Inc.” to be transferred to “Alphabet” at the end of the business day, while its class A and C stocks will swap place keeping their respective ticker symbols (GOOG & GOOGL), as well as the same shareholder rights.

For those of you who need to fresh their memory, Google announced that it would establish a new umbrella company, Alphabet, in August. And this was seen as a move that would let all investors know that the separation of Google’s activities, which they’ve been requesting for a long time now, has been done.

So while Google will be the biggest branch, the basic idea behind the creation of Alphabet is to spin off these businesses that stray off Google’s original purposes. That would include projects from self-driving cars to home automation systems – subsidiary company Nest.

Larry Page is now officially Alphabet’s CEO while Google co-founder Sergey Brin, will serve as president. In fact, in a relevant blog spot, Page mentioned that Google is “operating well today, but we think we can make it cleaner and more accountable.”.

This reorganization will definitely change a lot but here are the most significant and notable changes concerning Google:

 

Google will go back to the basics

In a few words, this means that Google will now be shrunk down to its core activities, which is the Internet services, YouTube, Maps, advertising and the Android operating system. Sundar Pichai will take up as the new CEO, formerly head of the Android department.

 

Good news for investors

Cometh the fourth quarter of 2015, investors can expect two different segments for financial reporting; one with Google which will be separate from the other Alphabet businesses, and the rest including Google which will be reported as a whole, according  to an SEC filing explaining the reorganization.

 

Other Projects under the Alphabet Umbrella

According to Page, all companies that are pretty far afield of Google’s main internet products will become a part of Alphabet, but one that is not to be confused with Google and its similar projects, which will be a whole other part.

It is indeed kind of perplexing for customers and practically everybody else except investors, but thankfully it will not affect the rest of us in any way.

For instance, Google-X, the semi-secret facility that is responsible for projects such as self-driving cars and Wing, will become a part of Alphabet while at the same time companies such as Fiber, Nest, Google Ventures and Google Capital will be included as well.

 

What will Alphabet’s role be ultimately?

Each company inside Alphabet will run partly independently with their own CEO, but on the top of the ladder, Page and Brin will be determining their compensation.

In a blog post, Page says:

“We will rigorously handle capital allocation and work to make sure each business is executing well. The whole point is that Alphabet companies should have independence and develop their own brands.”

In the long run, this change is probably expected to renew the flow of investments made on each company and project, thus giving birth to more technological achievements. At least that is the plan.

Now since we’re not the ones making the investments – unless you have a few dozens or hundreds of million to spare – the next best thing we can do is sit back and watch how things go from here- so stay tuned for further updates regarding the matter.

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