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Google Creates Parent Company Called Alphabet

By August 10, 2015Big News, Blog

Google announced late Monday that it is creating a new parent company called Alphabet, which will replace Google Inc. as the business traded on the stock market. Google, the service, will be the largest single entity owned by that parent company.

As part of the move, Google’s founder and CEO Larry Page will take over as CEO of Alphabet. Sundar Pichai, Page’s top deputy at Google, will take over as CEO of Google.

“Our company is operating well today, but we think we can make it cleaner and more accountable,” Page wrote in an announcement on Monday titled “G is for Google.”

In essence, this allows Google to build a more robust portfolio of businesses, each with its own dedicated CEO, under the Alphabet umbrella. Google’s investments already extend well beyond search and smartphones to include the life extension project Calico, its moonshot division Google X and Nest, the home device manufacturer that it acquired for $3 billion last year.

The operational change may help establish Google (or Alphabet) as an alternate version of Berkshire Hathaway, the portfolio of long term businesses and investments run by famed investor Warren Buffett.

In an interview with The Financial Times last year, Page suggested that Buffett and his business are the closest models for what he wants to build in the future.

Beyond that, the change continues a long, gradual trajectory of freeing up Page from day-to-day management of Google, allowing the founder to think more broadly about the company’s future. It also may just appeal to the vanity of top execs within the company: Suddenly there are a few more C-suite opportunities.

The move comes at a time when Wall Street is once again in love with Google, following a strong earnings report and the hiring of a well-regarded CFO. Investors appeared to cheer the introduction of Alphabet: Google stock jumped 5% in after hours trading following the announcement.

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