Google is coming to grips with its ginormous size and is forming a parent company called Alphabet in a move to streamline its corporate structure. Under Alphabet, Google aims to better organize their many businesses by operating as a collection of separate entities. The 17-year-old company has many sprawling interests including Internet search, drones, investments, healthcare, online shopping, and self-driving cars. Some of these decisions have spooked investors. But now Google is listening to Wall Street while also trying to keep the innovation going.
“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.” said Larry Page, the chief executive of Google. The largest will be Google, which will contain core businesses including search, ads, maps, YouTube, and Android. It will be managed separately from investment arms Google Ventures and Google Capital, as well as other projects such as Fiber, Nest, Google X, Calico, and Life Sciences.
The change also means new structuring in the leadership. Alphabet will be run by Google co-founders Larry Page and Sergey Brin, and Google will be a subsidiary of Alphabet with a new CEO, Google executive Sundar Pichai. Other units will include Google X for self-driving cars and Internet balloons, Wing for a drone delivery project, and Google Fiber’s high speed internet.
When the news was announced Google shares rose 6% in after-hours trading. Alphabet will replace Google as the publicly traded entity, and all shares of Google will be automatically converted into shares of Alphabet.