Google is now Alphabet: what you need to know about Alphabet

On Monday, Google announced that it is forming a new company, called Alphabet. Alphabet won’t be part of Google. Rather, Google will become part of Alphabet.

Google CEO and co-founder Larry Page will step down from the top post at Google and become CEO of Alphabet. Fellow Google co-founder Sergey Brin will become Alphabet’s president. Longtime Google executive Sundar Pichai is now Google’s CEO.

So what is Alphabet and what exactly do you really need to know about Alphabet? According to a blog post by Page, Alphabet is mostly a collection of companies. The largest of which, of course, will be Google. However, the newer Google will be a bit slimmed down, with the companies that are pretty far afield of Google’s main Internet products contained in Alphabet instead.

Google will retain its core search and advertising businesses, as well as its maps division, YouTube, and Android. Most of its other ventures will now be run separately under the Alphabet umbrella. Those include: Calico, a project devoted to extending the human lifespan, Nest, the company’s smart-home division, Fiber, its ultra-high-speed Internet infrastructure project and Google X, the lab that incubates “moonshots” like solar-powered Internet balloons and self-driving cars. It also incubates new efforts like Wing, Google’s drone delivery effort, Google Ventures, Google Capital, and related investment arms.

“Fundamentally, we believe this allows us more management scale, as we can run things independently that aren’t much related. Alphabet is about businesses prospering through strong leaders and independence. In general, our model is to have a strong CEO who runs each business, with Sergey and me in service to them as needed. We will rigorously handle capital allocation and work to make sure each business is executing well,” said Page.

Under Alphabet each business will also get a CEO. In addition, with this new structure Google also plans to implement segment reporting for its Q4 results, where Google financials will be provided separately than those for the rest of Alphabet businesses as a whole.

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 also become a wholly-owned subsidiary of Alphabet. However, Page explained that the two classes of shares will continue to trade on Nasdaq as GOOGL and GOOG.

“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,” he added.

With Alphabet inc. Google is excited about getting more ambitious things done, taking the long-term view, empowering great entrepreneurs and companies to flourish, investing at the scale of the opportunities and resources Google sees, improving the transparency and oversight of what Google is doing, making Google even better through greater focus and hopefully as a result of all this, improving the lives of as many people as we can.

“This new structure will allow us to keep tremendous focus on the extraordinary opportunities we have inside of Google,” concluded Page.