G is for Google

“We did a lot of things that seemed crazy at the time. Many of those crazy things now have over a billion users, like Google Maps, YouTube, Chrome, and Android. And we haven’t stopped there. We are still trying to do things other people think are crazy but we are super excited about. 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.” – Larry Page

Immediately after Larry Page, now CEO of the newly founded parent company called Alphabet, released his statement, the talk of Wall Street and Silicon Valley quickly became filled with a combination of enthusiasm, speculation, and doubt about the big move. In a nutshell, the founders, Larry Page and Sergey Brin, have now reorganized Google into Alphabet. With this reorganization, Alphabet has become a new holding company and its largest subsidiary is Google. With many new, and at times financially risky, projects that are aimed at creating innovative products constantly on the horizon, Alphabet as the holding parent corporation will benefit by protecting itself from potential losses. With this new structure, Alphabet and its subsidiaries will have limited financial and legal liability allowing the company more freedom in their pursuit of the kind of innovation that will change the world forever.

With Page and Brin now shifting a lot of their attention to Alphabet, they have also announced a radical shake-up of the company’s corporate structure. Now at the helm of Google is the highly sought after executive Sundar Pichai. Pichai, previously a Senior Vice-President at Google and often considered Page’s right hand man, will be leading Alphabet’s core business and whose profits will ultimately fund the other subsidiaries. Google has a more focused scope and line of business now that other lines of business, such as Google X, have become individual subsidiaries of Alphabet.

Many experts are now comparing Alphabet’s new structure to that spearheaded by Warren Buffet, Berkshire Hathaway. Berkshire Hathaway is a conglomerate holding company that primarily utilizes funds from its stakes in insurance companies to fund its other ventures. Berkshire Hathaway has stakes in a diverse portfolio of companies through numerous mergers and acquisitions, which is vital to the success of any holding company. It is yet to be seen what Alphabet’s next move will be but the company has shown its strength in acquisitions over the years through significant moves such as Google’s acquisition of YouTube for $1.65 billion. YouTube is now projected to reach well over $10 billion in revenue.

Although it is unclear at this time how Page and Brin plan to move forward following their big announcement, it is clear that the investment world is excited as stock prices have risen since the news broke. Nobody could have said it better then Page when he wrote “What could be better? No wonder we are excited to get to work with everyone in the Alphabet family. Don’t worry, we’re still getting used to the name too!”

We may all be getting used to the new name, but it will only be a matter of time before we get used to the idea that the G is only a part of the larger Alphabet.