Four knowns and four unknowns in Google's Alphabet soup
When Google announced on Monday that it would create a new holding company called Alphabet, of which Google Inc. will be just one part, Larry Page said the new structure would allow the company to get more ambitious things done. But there was still a lot that he didn’t say.
The move should free up time for Page and Sergey Brin to focus on Google’s forward looking projects like self-driving cars, and allow other leaders, like Sundar Pichai, to take care of the core businesses. It should also provide a bit more transparency for Google’s investors, allowing them to see better how those core businesses are performing.
But there are questions too, about how Alphabet will evolve and which other companies might get their own CEOs. Here are four knowns and unknowns about what happened yesterday.
Known: Google Inc. becomes a more focused company
The restructuring leaves many familiar services in the company that will be called Google, while tossing a lot of other projects out. It will still be the home of search, ads, maps, apps, YouTube, Android, Hangouts, and Chrome—the software and services that have been Google’s primary moneymakers for years.
But Google Inc. won’t exclusively be made up of core services—it will also include the Advanced Technologies and Projects group, or ATAP. That group is responsible for a few futuristic projects, like Google’s Tango 3-D mapping technology for smartphones and tablets, and a project to develop smart fabric in partnership with Levi Strauss. Google inherited the group when it acquired Motorola Mobility in 2011. Google later sold Motorola, but it kept ATAP.
Known: The rest of Alphabet is a sprawling incubator for other projects
Moon-shot projects, along with other services outside of Google’s core money makers, will comprise the rest of Alphabet. This includes Nest, which makes smart thermostats, smoke detectors and now security cameras. Here too will be the Google X research lab, the unit developing self-driving cars and Internet connected balloons, and the broadband Internet connectivity business Google Fiber. This side of Alphabet will also house Calico, a biotech company focused in the areas of health and aging. Google announced the formation of Calico in 2013.
In a blog post Monday, Page said situating these far afield businesses apart from the main Internet products will allow for more management scale, to run things independently that aren’t very related. Each business will have its own CEO, he said.
Unknown: The ABC’s of Alphabet
Page said the name Alphabet was chosen because it means a collection of letters representing language, with language being the core of how Google indexes search. “G is for Google,” the company said, but it didn’t assign names to the other 25 letters.
If each letter could become a Google businesses unit, how many letters already have associated identities? “C” could just as easily be for Calico or for Chrome. “A” could be for Android ... or ads. “B” could be for Boston Dynamics, the robotics company acquired by Google in 2013, which builds robots that mimic the movements of humans and animals, including for the U.S. military.
Unknown: The timing
In a filing with the Securities and Exchange Commission, Google said the new structure will be introduced in phases over the coming months.
Later this year, Google will implement a holding company reorganization, known as the “Alphabet Merger,” which will result in Alphabet owning all of the capital stock of Google. As part of the merger, Google will survive as a wholly owned subsidiary of Alphabet.
But a more specific time frame wasn’t given, so the next shoe could drop any time. Google will report its financial results under the new structure with its fourth-quarter earnings, expected in January. That would suggest that the restructuring, at least for accounting purposes, will be underway by the start of that quarter, in October.
Known: More transparency is coming
Under the restructuring, financial results for Google Inc. will be reported separately. Results for the other Alphabet businesses will be reported as a whole. This means that there will be a distinction made between, say, revenue generated from search ads versus revenue from the Fiber or Nest businesses. This could be a positive for Wall Street investors, who crave details about the health, or weaknesses, of Google’s various units with as much specificity as possible.
Unknown: Just how much transparency there will be
But because revenue from the Alphabet businesses outside of Google Inc. will be reported as a whole, the information disclosed may still have plenty of gaps. It might be some time before we see financial results for, say, Nest versus Fiber.
Known: The new top brass
Sundar Pichai will become CEO of Google Inc. Though his title upgrade is a big one, he will still oversee many of the same products he does now. Pichai was named Google’s head of product last October, which put him in charge of the company’s key businesses like Android, search and Chrome.
Page, currently Google’s CEO, will become CEO of Alphabet and Brin will be its president. Eric Schmidt, currently executive chairman at Google, will become executive chairman at Alphabet.
Unknown: Page’s public profile going forward
Page stepped back from managing the day-to-day responsibilities of many of Google’s core products when he promoted Pichai late last year. As the official head of the most advanced and futuristic projects at Alphabet, will Page take on a more public role in running those operations?