Google Inc. announced plans to create a new public holding company, Alphabet Inc. Google CEO Larry Page made this announcement in a blog post on Google’s official blog. Alphabet will be created to restructure Google by moving subsidiaries from Google to Alphabet, narrowing Google’s scope. The company will consist of Google Inc., Nest Labs and Calico, as well as other businesses including Google X, Google Capital and Google Ventures. Sundar Pichai, current Product Chief, is to become the new CEO of Google, replacing Larry Page.
In his announcement, Larry Page described the newly constructed company:
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… Alphabet Inc. will replace Google Inc. as the publicly-traded entity and all shares of Google will automatically convert into the same number of shares of Alphabet, with all of the same rights. Google will become a wholly-owned subsidiary of Alphabet. Our two classes of shares will continue to trade on Nasdaq as GOOGL and GOOG.
Larry Page also explained the views behind the name of the new company, as well:
For Sergey and me this is a very exciting new chapter in the life of Google — the birth of Alphabet. 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! I should add that we are not intending for this to be a big consumer brand with related products–the whole point is that Alphabet companies should have independence and develop their own brands.
Google is now a company underneath Alphabet, as are Life Sciences, Calico, X lab, Ventures, Capital, and Wing. The new Google is “a bit slimmed down, with the companies that are far afield of our main internet products contained in Alphabet instead.” The big thing is that Sundar Pichai was named as the future CEO of Google, a position he will assume once the restructuring process is completed.
To start the restructuring process, Alphabet will be created as a subsidiary directly owned by Google. The roles of these two companies – which one is the owner and which one the subsidiary – will then be reversed in a two-step switch. First, a dummy subsidiary of Alphabet will be created. Then Google will merge with that dummy subsidiary while converting Google stock to Alphabet stock. The subsidiary after the merge, no longer a dummy, will be named “Google, Inc.”. Alphabet stock will continue to trade under the symbols “GOOG” and “GOOGL”. Under Delaware law, a holding company reorganization such as this can be done without a vote of shareholders, and this reorganization will be.
What are your thoughts?
Source: Google Blog, Wikipedia
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