Google Is Now Alphabet: Here's Larry Page's Rationale

The company announced the creation of what is effectively a new holding company with Larry Page and Sergey Brin at its helm.

Sundar Pichai, Google's new CEO (Jeff Chiu / AP)

Google announced Monday a massive restructuring, creating what is effectively a new holding company called Alphabet with Larry Page and Sergey Brin at its helm. The move elevates company veteran Sundar Pichai to Google’s CEO.

Here’s more from the company’s announcement, in the form of a blog post from Page:

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. What do we mean by far afield? Good examples are our health efforts: Life Sciences (that works on the glucose-sensing contact lens), and Calico (focused on longevity). Fundamentally, we believe this allows us more management scale, as we can run things independently that aren’t very related. Alphabet is about businesses prospering through strong leaders and independence. In general, our model is to have a strong CEO who runs each business, with Sergey and me in service to them as needed. We will rigorously handle capital allocation and work to make sure each business is executing well. We'll also make sure we have a great CEO for each business, and we’ll determine their compensation. In addition, with this new structure we plan to implement segment reporting for our Q4 results, where Google financials will be provided separately than those for the rest of Alphabet businesses as a whole.

Pichai, who serves as Google’s senior vice president of products, is Google CEO, the announcement said.  Bloomberg reported Ruth Porat will be chief financial officer.

The New York Times provides some context to Monday’s announcement:

The structure is reminiscent of that of Berkshire Hathaway, which is Warren Buffett’s industrial empire. Mr. Buffett has built Berkshire Hathaway into a giant conglomerate that includes railroads and Fruit of the Loom underwear.

Page’s announcement added:

Sergey and I are seriously in the business of starting new things. 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.

Page said the company’s brain trust doesn’t intend for Alphabet to be a consumer brand with related products.

He added: “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! We also like that it means alpha-bet (Alpha is investment return above benchmark), which we strive for!”