Tech giant Google has gone through a lot of changes since its creation 16 years ago. And it has long since expanded beyond its core business as a search browser, becoming one of the biggest and most far-reaching tech companies on the planet. But Google may be about to experience its most drastic change to date.
Yesterday, CEO Larry Page (pictured) announced that Google will undergo a major restructuring. In fact, in some ways, it will not even be “Google” at all -- from now on, that name will refer only to the company’s search business. The parent company, and the name of its publicly listed stock, will be called “Alphabet.”
A Slimmer Google, a Bigger Alphabet
Despite the name change, Google will remain the largest subsidiary within the Alphabet umbrella. Page will become CEO of the parent company, alongside Sergey Brin who will act as Alphabet’s president. Sundar Pichai, Google's former product chief, has been appointed as CEO of Google. If so little is changing other than the name, why bother with the transition?
According to Page, it boils down to a question of focus and clarity. “Our company is operating well today, but we think we can make it cleaner and more accountable,” Page said on Google’s public relations Web site. “This newer Google is a bit slimmed down, with the companies that are pretty far afield of our main Internet products contained in Alphabet instead.”
As a result, some of the company’s more ambitious or non-Internet related projects will now be organized as part of Alphabet, and will be considered separate from the core Internet business. That will include divisions like Life Sciences and Calico, which tend to focus on moonshot goals such as developing glucose-sensitive contact lenses or extending the human lifespan.
Google’s X Lab, which functions as a sort of skunkworks for the company incubating new products such as a drone delivery system, will also be a separate Alphabet subsidiary. Ventures and Capital, Google’s investment division, will function as a separate subsidiary as well.
More Clarity for Investors
Other than the name of the new parent, and news of Pichai’s appointment as Google CEO, Page did not provide many details on any additional changes that would result from the reorganization. Each Alphabet subsidiary will have its own CEO, allowing the company to run different divisions independently that may not be closely related. It will also ensure each subsidiary has its own strong leadership, with Page and Brin supporting them and making decisions on capital allocation for each subsidiary.
“This new structure will allow us to keep tremendous focus on the extraordinary opportunities we have inside of Google,” Page said. Despite the reorganization, Google will continue to develop new products within the subsidiary, such as the recently launched Google Photos and Google Now.
The company will begin reporting results for separate segments beginning with its fourth quarter results. That should provide a bit more clarity to investors, since Google’s core Internet business will now be split out into its own segment.