Google buys time for bold bets with new Alphabet structure

Tue Aug 11, 2015 8:42pm EDT
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By Julia Love and Yasmeen Abutaleb

(Reuters) - By separating moonshots from moneymakers, Google founders Larry Page and Sergey Brin are now free to pursue more quixotic business ideas such as glucose-monitoring contact lenses, Internet-connected, high-altitude balloons and even immortality.

Investors cheered the corporate restructuring announced Monday for giving greater visibility into Google's central business and seemed less anxious about zany ventures that may pose as distractions.

But of all the businesses in Alphabet – the new holding company that isolates the core search and advertising business from riskier bets – popular smart home accessory maker Nest Labs is likely the only unit that will give investors the returns they crave anytime soon, analysts told Reuters.

They added that Google's self-driving cars and health ventures, such as storing data on human DNA in the cloud, are potentially profitable, but not for at least several years.  

"In the near term, investors are going to focus on the core business and give them some leeway," said Macquarie Research analyst Ben Schachter.

The company's shares rose 4 percent Tuesday in the wake of the announcement and climbed as much as 7 percent the previous day in after-hours trading.

Under the structure - search, advertising, maps, YouTube and Android will remain part of Google under the leadership of new Chief Executive Officer Sundar Pichai, currently the company's product chief. Search remains the company's financial engine, driving more than 90 percent of revenue, according to analysts.

Nest, anti-aging company Calico, smart cities company Sidewalk, secretive lab Google X, as well as Google Capital and Google Ventures - two investing units - will all be run separately with their own leaders, Google said. Through those ventures, Google has tried to accomplish everything from improving public transportation to prolonging the human lifespan.   Continued...

A Google search page is seen through a magnifying glass in this photo illustration taken in Berlin, August 11, 2015. REUTERS/Pawel Kopczynski