Google (GOOG) to Restructure as Alphabet

The biggest piece of news in today's after hours trading saw Google file paperwork to restructure. The SEC filing indicates that Google is going to be reorganizing their company under the umbrella of Alphabet, a holding company which will manage Google's assets and subsidiaries.

Reorganized Leadership

The plan would put Larry Page at the helm of Alphabet as CEO. Sergey Brin, another founder of Google, would be President, and Eric Schmidt would take his place as executive chairman of the new entity.
That accounts for all of Google's original founders, but it also opens up quite a few senior leadership positions at Google itself. Sundar Pichai was tapped to take over the role of CEO at Google itself upon completion of this reorganization, and Ruth Porat will take on the role of CFO at both Alphabet and Google.

Shares and Structure

Google's current shareholders will see their stock automatically convert to Alphabet shares. They will convert on a 1:1 basis, with minimal disruption for anyone who currently holds a stake in Google. In fact, according to Google's blog, they aren't even planning on changing their ticker symbols.

At this point it's still unclear what the timetable would be for this reorganization. Google's blog announced the restructuring as follows, "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 our main Internet products contained in Alphabet instead."

Under this new structure, Google would be held by Alphabet. Rather than spinning off new products under the auspices of Google directly, it would be Alphabet that launches new products like self-driving cars and other innovations. Google would exist as an entity that concentrates on search.

Alphabet's Plans Going Forward

Google is famous for innovation, and this new structure will essentially break down management into two types. There will be caretakers, who manage mature products like Google search and Shopping, and innovators who are managing small teams that are developing products. In their press release, Google's leadership hinted at some of their new projects on the horizon.

"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."In addition to others, Google also mentioned biomedical contact lenses that monitor blood glucose that are allegedly on the horizon for the company.

With Google's continued innovation, maybe the company has been long overdue for a restructuring like this. Still, the news took shareholders by surprise today.
Published on Aug 11, 2015
By Aaron Phillips
Aaron Phillips is a financial researcher and journalist based out of Michigan. He regularly writes the IG Daily and IG Weekly columns.

Copyrighted 2020. Content published with author's permission.

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