About nine months after taking leave from his day-to-day responsibilities to gain a vantage of the "big picture," Google Co-Founder Larry Page announced that many of the businesses that had grown inside Google's belly would be given legs and more autonomy. Sheltering Google and its offspring is Alphabet, an umbrella company that lets Google act more like Google.
Alphabet is primarily a collection of companies and Google is the largest of the group, Page explained in announcing the new holdings company last Monday.
"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," said Page.
Unburdened by disparate businesses, such as its biotech and life sciences companies, Google can now focus more on Internet-related businesses instead of self-driving cars, drones, Google Glass and smart contact lenses.
The Street seems to be full of bulls and many, including Cowen and Company, forecasts that Google will outperform.
"This is a significant move as it 1) Aligns mgmt. more closely to business lines; 2) Increases transparency into Core Google (Search, YouTube, etc) and Non-Core (Fiber, etc.), highlighting higher Core profits," stated a note from Cowen and Company. "This move is unambiguously constructive to our GOOG thesis."
Not only will the formation position Google's management more closely to business lines, it'll also give Alphabet's other businesses more autonomy. Former Google businesses, such as connected home company Nest and Google Ventures, will be led by "strong" CEOs and supported by executives from adjacent market, according to Page.
"Alphabet is about businesses prospering through strong leaders and independence," said Page. "In general, our model is to have a strong CEO who runs each business, with Sergey and me in service to them as needed."
This, Alphabet, is what Page was searching for last fall. Page wanted a way to look at the "big picture" of what has become of what he and co-founder Sergey Brin created eleven years ago.
"This new structure will allow us to keep tremendous focus on the extraordinary opportunities we have inside of Google," Page said. "A key part of this is Sundar Pichai."
Sundar's at the Summit
Sundar Pichai tried to convince a colleague not to join Google and, in doing so, talked himself into migrating to the search engine company, so the story goes.
Pichai, who joined Google in 2004, championed the Chrome browser. He climbed the ranks at Google, holding positions as vice president of product and chief of Google apps, all before heading up the company he doubted about a decade ago.
Nowadays, Pichai is as good as Page and Brin. Pichai is the man, stated Brad Shimmin, an analyst with Current Analysis
"He's very charismatic and he's definitely [has a] CEO level of competence and swagger that you would expect to see from a company like Google," said Shimmin. "I think he's the perfect choice."