So much for a slow news summer. On Monday, Google (GOOGL)
surprised the market with a huge corporate restructuring announcement.
But what exactly did the giant tech company do and why should investors
care? Here are a few answers:
1. Google is changing its name to Alphabet? For real?
Not exactly. Google is forming a new holding company which will own all of the company's current businesses and initiatives. The holding company will be called Alphabet, but Google says it isn't planning to use that name for any consumer-facing products or services. All of Google's well-known services, like its search engine, YouTube video site, Android phone software, Maps and Gmail will remain part of Google. Google just becomes one unit in the new Alphabet company.
2. So what's the point?
Well, besides the classic Google businesses, the company also owns a hodgepodge of less famous, less developed and (much) less profitable units. It paid $3.2 billion for smart thermostat maker Nest last year. Two years ago, it started a brand new medical unit called Calico to take on the oh-so-modest challenge of extending human longevity by using data and biotechnology to maybe cure cancer. And, of course, it has myriad other experimental efforts, like self-driving cars, Internet balloons and fiber-optic broadband service.
1. Google is changing its name to Alphabet? For real?
Not exactly. Google is forming a new holding company which will own all of the company's current businesses and initiatives. The holding company will be called Alphabet, but Google says it isn't planning to use that name for any consumer-facing products or services. All of Google's well-known services, like its search engine, YouTube video site, Android phone software, Maps and Gmail will remain part of Google. Google just becomes one unit in the new Alphabet company.
2. So what's the point?
Well, besides the classic Google businesses, the company also owns a hodgepodge of less famous, less developed and (much) less profitable units. It paid $3.2 billion for smart thermostat maker Nest last year. Two years ago, it started a brand new medical unit called Calico to take on the oh-so-modest challenge of extending human longevity by using data and biotechnology to maybe cure cancer. And, of course, it has myriad other experimental efforts, like self-driving cars, Internet balloons and fiber-optic broadband service.
Until
now, all those expensive initiatives, which produce little or no
revenue, were lumped in with Google's overall results. That muddied the
analysis of how well Google's developed businesses were performing. But
with the restructuring, the company is going to tell Wall Street for the
first time just how profitable its core Google business is apart from
all the money-losing startups.
3. Sounds like just rearranging the same old parts of Google into a slightly different legal structure. So what's really the point?
Well, yes -- co-founders Larry Page and Sergey Brin are still devoted to all of their big bets on the future. And despite the creation of Alphabet, they say that they're not slowing down or cutting back. But Wall Street has been increasingly annoyed by the huge amount of money siphoned off on these "non-core" businesses. Alphabet looks like an attempt to answer the critics by revealing more information about the performance of the parts of Google that Wall Street and investors actually care about.
3. Sounds like just rearranging the same old parts of Google into a slightly different legal structure. So what's really the point?
Well, yes -- co-founders Larry Page and Sergey Brin are still devoted to all of their big bets on the future. And despite the creation of Alphabet, they say that they're not slowing down or cutting back. But Wall Street has been increasingly annoyed by the huge amount of money siphoned off on these "non-core" businesses. Alphabet looks like an attempt to answer the critics by revealing more information about the performance of the parts of Google that Wall Street and investors actually care about.
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