One fine Monday afternoon in August 2015, the markets witnessed a new move.
Google Inc. got itself a parent entity – Alphabet Inc., by presenting a formal notice to Wall Street with the intentions to bring its widening interests and product lines under the new umbrella.
Why a household name known around the world made such a move?
“The new entity would help them take a long-term view and improve the “transparency and oversight” of their actions.
The new entity, he wrote, was an “alpha-bet (Alpha is investment return over benchmark), which we strive for!” , Larry Page, CEO of Alphabet Inc announced the move in a blog post.
Google renamed itself ‘Alphabet’ and Google, a subsidiary.
Subsequently, Alphabet, as a parent company gave freedom to Google to smoothly expand into domains outside the mainstream i.e. internet search and advertising, to become a technology conglomerate
The new corporate structure assisted Google with a lesser risk of anti-trust violations and is also better able to account for income streams from various subsidiaries
What went where
Apart from Google’s core search business, Alphabet Inc got in its abode the other eight companies – Calico, DeepMind, GV, CapitalG, X, Google Fiber, Jigsaw, Makani, Sidewalk Labs, Verily, Waymo, Wing and Loon– which span over a diverse array of industries, from robotics to life sciences, to healthcare and anti-ageing.
Changes for investors
The reorganization did not bring many changes for investors.
As per the SEC filing, each share of Google Inc. got swapped for an Alphabet Inc. share.
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Why google went for Alphabet?
Positioned above Ford and General Motors market Capitalization, Google was happily welcomed by Wall Street due to its prowess in search.
The apple of Wall street’s eye started losing its charm due to the advent of the social media brigade.
Facebook’s invasion on Google’s core business and the disintermediation of Web search into mobile apps scratched the company’s smooth trajectory.
The unpleasant surprises didn’t end here; Google’s new or acquired ventures’ expenses and increasing costs raised the ears of Wall Street.
And this was when Google decided to give itself a parent company.
According to the author of Google’s ten commandments, Larry Page and Sergey always had a bigger picture of technology’s role in the world.
“Larry’s vision was always to be something like General Electric (GE), and Google was only his first proof-of-concept,” he is quoted in the New York Times.
The plan was intended to clear markets’ clouds by streamlining operations and providing investor visibility into the operations of Alphabet Inc.’s new ventures and acquisitions.
The fruits fell in favour; Alphabet Inc. was able to convince the investors that it can deliver profits even as it explores new markets and avenues for future profits.