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Google now an Alphabet company

Alphabet is a new parent company that includes a “slimmed down” Google alongside companies not related to core internet products

Google founders Larry Page and Sergey Brin have restructured the firm, creating a new parent company and stripping Google down to is core.

“Our company is operating well today, but we think we can make it cleaner and more accountable. So we are creating a new company, called Alphabet,” Page wrote in a blog post.

“I am really excited to be running Alphabet as CEO with help from my capable partner, Sergey, as president.”

According to Page, Alphabet is a collection of companies that includes a “slimmed down” Google, with the companies that are not related to core internet products contained in Alphabet instead.

This means companies such as Life Science, which works on the glucose-sensing contact lens, and Calico, which is focused on longevity, now come under Alphabet, as do Google Fiber, Google X, Google Ventures, Google Capital and Nest.

The new Google will comprise search, apps, YouTube and Android.

“Fundamentally, we believe this allows us more management scale, as we can run things independently that aren’t very related,” wrote Page.

Page is CEO of Alphabet while Brin is president, and former Google chairman Eric Schmidt is now executive chairman of Alphabet.

Google's new chief financial officer, Ruth Porat, will hold the same title for Google and Alphabet.

Page said that under the new structure, the plan is to have a strong CEO who runs each business, with former Google senior vice-president Sundar Pichai becoming CEO of the new Google.

Pichai joined Google in 2004 and has led the product management and innovation efforts for several Google products, including Google Chrome, Chrome OS, Google Drive, Gmail and Google Maps. In March 2013, Pichai took over management of Android from Andy Rubin.

Page said he and Brin will provide support to the CEOs of the Alphabet companies as required and will “rigorously handle capital allocation and work” to ensure each business is executing well.

Under the new structure, Google financials for the fourth quarter will be provided separately from those for the rest of the Alphabet businesses as a whole.

“Sergey and I are seriously in the business of starting new things,” said Page. “Alphabet will also include our X lab, which incubates new efforts like Wing, our drone delivery effort. We are also stoked about growing our investment arms, Ventures and Capital, as part of this new structure.” 

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Alphabet Inc will replace Google Inc as the publicly traded entity, Google will become a wholly owned subsidiary of Alphabet, and all shares of Google will automatically convert into the same number of shares of Alphabet, with all the same rights.

Page said he and Brin chose 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” and because Alpha-bet means "investment return above benchmark, which we strive to do".

Page added: “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.”

While some are describing the restructure as a “surprise move”, insiders say it is not that surprising. “This has been discussed for the last four years,” one former executive told Business Insider. “The details are a little bit different, but the idea is the same.”

Analysts have welcomed the move because Alphabet gives its leaders and investors the ideal opportunity to make money while still taking risks.

They said that by separating the exploratory projects from Google’s core internet operations, Page can show investors that the core business remains highly profitable even if other ventures fail to show a profit for years.

Once the reorganisation is complete, the company says, its two existing classes of publicly traded stock will continue to trade on the Nasdaq exchange under the ticker symbols “GOOG” and “GOOGL”.

Both classes of the company’s stock rose more than 6% in after-hours trading following the announcement, according to the Seattle Times.

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