Google morphs into Alphabet; investors cheer clarity

Tue Aug 11, 2015 12:52am EDT
 
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By Mari Saito and Julia Love

SAN FRANCISCO (Reuters) - Google Inc (GOOGL.O: Quote) announced a surprise overhaul of its operating structure on Monday, creating a holding company called Alphabet to pool its many subsidiaries and separate the core web advertising business from newer ventures like driverless cars.

The move appeared to be an attempt by the search engine giant to focus on its more creative and ambitious projects, while investors cheered the potential for more financial disclosures of its disparate business segments.

"It suggests that in all likelihood, Google is not going to slow the pace of their experimental processes like self-driving cars," said Michael Yoshikami, head of Destination Wealth Management, which has $1.5 billion under management.

The surprise news sent shares of Google up as much as 7 percent to $708 in after hours trading.

The new structure could also give Wall Street better insight into Google's investment in moonshot projects like Google X, a secretive lab that produced the unpopular Google Glass wearable device.

"They are aware that they've got this hodgepodge of companies," said Roger Kay, an analyst at Endpoint Technologies Associates. "Maybe it's better to sort them out a bit and make it clearer which ones are bringing in the bacon and which ones are science projects and which ones are long-term bets."

The Mountain View-based company co-founded by Larry Page and Sergey Brin in 1998 has grown from an Internet search engine to a far-reaching conglomerate that employs more than 40,000 people worldwide.

Google's planned structure resembles the way companies like Berkshire Hathaway (BRKa.N: Quote) and General Electric (GE.N: Quote) are organized, with a central unit handling corporate-wide activities such as finance and relatively independent business units focused on specific areas.   Continued...

 
Sundar Pichai speaks during a presentation at the Mobile World Congress in Barcelona March 2, 2015.   REUTERS/Albert Gea