Huge inside shakeup as Google creates 'Alphabet' umbrella company

Let it never be said that Google is boring. Co-founder Larry Page today announced the creation of "Alphabet," a new corporation that will comprise Google and other previously Google-held properties to better allow them to act and grow independently. The change was announced across Google's collection of blog sites, as well as at the new (and cleverly domained) site

Page will serve as CEO of Alphabet. Sergey Brin, who co-founded Google with Page in 1998, will serve as president.

Shares of Google stock were up more than $30 a share in early after-hours trading.

So why make this huge business change? Page states:

We've long believed that over time companies tend to get comfortable doing the same thing, just making incremental changes. But in the technology industry, where revolutionary ideas drive the next big growth areas, you need to be a bit uncomfortable to stay relevant. Our company is operating well today, but we think we can make it cleaner and more accountable.

Alphabet will consist of a number of companies, of which Google will be the largest. Page says:

Alphabet Inc. will replace Google Inc. as the publicly-traded entity and all shares of Google will automatically convert into the same number of shares of Alphabet, with all of the same rights. Google will become a wholly-owned subsidiary of Alphabet. Our two classes of shares will continue to trade on Nasdaq as GOOGL and GOOG."

So why call the new company Alphabet? Again, Page says:

We liked the name Alphabet because it means a collection of letters that represent language, one of humanity's most important innovations, and is the core of how we index with Google search! We also like that it means alpha-bet (Alpha is investment return above benchmark), which we strive for! I should add that we are not intending for this to be a big consumer brand with related products--the whole point is that Alphabet companies should have independence and develop their own brands.

Some of the other companies that will be under the new Alphabet umbrella include its health businesses like Life Sciences and Calico, along with its X lab efforts. Each of these businesses will have its own CEO, which will receive guidance from Page and Brin.

The new Alphabet company has already launched its own website, but it's a pretty bare bones affair at the moment.

Update: In a Form 8-K filing with the US Securities and Exchange Commission, Google offered up some more info on the new Alphabet company structure, including confirming that Eric Schmidt will be the Executive Chairman for the new company. As expected, Android, YouTube, apps, search and maps will remain under the Google subsidiary. However, businesses like Google Fiber, Nest, Google X and others will be managed as separate subsidiaries.

The filing added:

Later this year, Google intends to implement a holding company reorganization (the "Alphabet Merger"), which will result in Alphabet owning all of the capital stock of Google. Alphabet will initially be a direct, wholly owned subsidiary of Google. Pursuant to the Alphabet Merger, a newly formed entity ("Merger Sub"), a direct, wholly owned subsidiary of Alphabet and an indirect, wholly owned subsidiary of Google, will merge with and into Google, with Google surviving as a direct, wholly owned subsidiary of Alphabet."

Source: Google, Alphabet

John Callaham