Google creates Alphabet to address bloat, heterogeneity

Google's holding company is intended to help it more effectively manage a growing and increasingly broad set of businesses

Google’s holding company is intended to help it more effectively manage a growing and increasingly broad set of businesses

Google has taken the decision to form a new holding company, Alphabet, of which its biggest component will be Google with its internet and cloud services. The move is likely to appeal to investors who don’t want expensive experiments and general sprawl bringing down its share price.

The company’s chief executive Larry Page revealed the news in a blog post this week.

“We’ve long believed that over time companies tend to get comfortable doing the same thing, just making incremental changes. But in the technology industry, where revolutionary ideas drive the next big growth areas, you need to be a bit uncomfortable to stay relevant.”

“Our company is operating well today, but we think we can make it cleaner and more accountable. So we are creating a new company, called Alphabet. I am really excited to be running Alphabet as CEO with help from my capable partner, Sergey, as President.”

Alphabet is a holding company that will include Google, the largest of its components, which will retain the internet-centric services it provides (including YouTube, Search, Maps, and its cloud services). But its other projects and divisions including Nest, Google X, Research, Fibre, and it venture capital arms (Ventures and Capital) will be spun out and operate under the broader Alphabet umbrella.

Page will serve as chief executive of Alphabet and Sergey Brin as its president. Sundar Pichai, who has led product development and engineering efforts for its internet businesses, will be bumped up to lead Google as chief executive.

“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.”

“Fundamentally, we believe this allows us more management scale, as we can run things independently that aren’t very 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.”