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Google Takes An AI Turn, Creates A Parent For Itself Named Alphabet

Written by on August 10, 2015

In a move that has surprised one and all, Google is restructuring how it runs itself. Google has created a new company called Alphabet that “is mostly a collection of companies,” writes Larry Page, the new CEO of Alphabet.

This already sounds like Warren Buffett’s Berkshire Hathaway and the way companies operate as independent entities under the Berkshire umbrella. Sergey Brin, Google’s co-founder, will be the new President of Alphabet.

The new CEO of Alphabet’s largest company, Google, will be Sundar Pichai. Eric Schmidt will be the Executive Chairman of Alphabet while Ruth Porat will be the Senior Vice President and Chief Financial Officer  of Alphabet as well as of Google.

Sundar Pichai Google CEO

SAN FRANCISCO, CA – MAY 28: Google senior vice president of product Sundar Pichai delivers the keynote address during the 2015 Google I/O conference on May 28, 2015 in San Francisco, California. The annual Google I/O conference runs through May 29. (Photo by Justin Sullivan/Getty Images)

Mr. Page continues:

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.

Re/code has details about the people who’ll lead the other divisions:

  • Tony Fadell, of Nest Labs, who Page is relying on to lead hardware efforts
  • Arthur Levinson, of Calico, the longevity research division
  • Craig Barratt, of Fiber, the high-speed broadband service
  • Dan Doctoroff, of Sidewalk Labs, the new company for cracking urban problems
  • Sergey Brin, now president of Alphabet and still overseer of X, which includes Project Loon, Wing (drones) and self-driving cars
  • David Lawee, who runs Google Capital
  • Bill Maris, who runs Google Ventures

Google Stock Price Up In After Hours Trade

Google investors are happy with the announcement sending the stock price up nearly 6% in after-hours trading. Combined with the rise in the stock price after the second quarter results were announced on July 16, Google stock is up by nearly 20% including today’s after-hours rise. Alphabet will now trade on NASDAQ, albeit with the same old symbols, GOOG, and GOOGL. Google’s — or, rather, Alphabet’s — market capitalization is now inching towards the $500 billion mark with the P/E ratio at above 30.00 and the stock within striking distance of the $700 mark.

(Warren Buffett Buys Himself A … Large Manufacturing Company)

Remember when Apple stock hit that mark, it decided to go for an unusual one-into-seven stock split though it was facing pressure from activist investors at that point. Google of course remains the second most valuable company in the world right after Apple. It remains to be seen if Google would go for a similar stock split as Google. Google remains highly profitable with comfortable cash reserves of near $70 billion — which is nowhere near Apple’s level of $200 billion but about the same as that of Berkshire Hathaway which it deployed today to make its biggest ever acquisition.

Google too has made numerous acquisitions through history including brands we instinctively associate with Google today such as Android, Chrome, YouTube, and Google Maps. It continues to acquire companies such as Nest and many others as it expands into newer territories.

Alphabet = ABC.XYZ

With Alphabet acting as the parent company, other companies operating under the structure will include a company focused on health efforts called Life Sciences, and a company focused on longevity called Calico.

Reflecting the first-come-first-serve basis of internet domain names, the new company’s domain is not going to be alphabet.com but rather a unique one at abc.xyz. This may have been born out of necessity since Google does not own the alphabet.com domain. BMW, the German luxury auto group owns the Alphabet domain.




Larry Page As Visionary

Larry Page has always been the visionary kind of CEO who looked at the big picture and keeps searching for the next big opportunities. In an interview to the Financial Times of London last year, Mr. Page had talked about some of his long-term visions including much cheaper housing and the self-driving cars where Google is the leader at the moment and ahead of the pack of competitors including major automakers and Tesla.

Among big thinking visionaries leading private enterprises today —and hoping to be anointed with the title of ‘the next Steve Jobs’ — Mr. Page’s competitors include Elon Musk, the CEO of Tesla and SpaceX.

The Fun Stuff

On the new Alphabet domain abc.xyz, you can search for the text “drone delivery effort” and click the full-stop at the end of it and that will take you to a new website. Yes, an Easter Egg.

Chris Andrikanich owns the @alphabet handle on Twitter.

He tweeted after the Google announcement came:

Presumably, he’s soon going to land himself a lot of Google cash or @alphabet cash.

So, today, the 10th of August has become historic not just because of the Google announcement but also the historic developments at the International Space Station (ISS) where the ISS residents, astronauts and cosmonauts, harvested their homegrown — or, rather space-grown — lettuce and had themselves a veggie salad; or lunch.

As Commander Scott Kelly tweeted:

The puns and possibilities were too good and even NASA couldn’t resist them:

As Mr. Andrikanich tweeted, that was indeed an interesting way to end a Monday. Though one wonders, why today …