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Google announces plans for new operating structure

Google creates new company called Alphabet, which will become the parent company.

11 August 2015, 1:18pm
Google founders Larry Page and Sergey Brin have announced a radical shake-up of the company’s corporate structure and management, handing control of its core search engine business to Sundar Pichai.

Parent company Alphabet has been set up, and Google will now become its subsidiary.

Page will be Alphabet’s CEO while Brin will becomes its President.

What is Alphabet?

Alphabet is mostly a collection of companies. The largest of which, of course, is Google. This newer Google is a bit slimmed down, with the companies that are pretty far afield of the main internet products contained in Alphabet instead. What does far afield mean? “Good examples are our health efforts: Life Sciences (that works on the glucose-sensing contact lens), and Calico (focused on longevity). Fundamentally, we believe this allows us more management scale, as we can run things independently that aren’t very related,” Paged said.

“Alphabet is about businesses prospering through strong leaders and independence. In general, our model is to have a strong CEO who runs each business, with Sergey and me in service to them as needed.

“We will rigorously handle capital allocation and work to make sure each business is executing well. We'll also make sure we have a great CEO for each business, and we’ll determine their compensation.

“In addition, with this new structure we plan to implement segment reporting for our Q4 results, where Google financials will be provided separately than those for the rest of Alphabet businesses as a whole.”

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. The two classes of shares will continue to trade on Nasdaq as GOOGL and GOOG.

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