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Google creates Alphabet holding company to aid diversification

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US search giant Google has announced the creation of a holding company called Alphabet that it’s claimed will enable its founders to better pursue non-core initiatives.

The move has attracted a lot of coverage, but it essentially just seems to be an arcane piece of corporate reshuffling with the aim of letting Google founders Larry Page and Sergey Brin do what they want – “smaller bets in areas that might seem very speculative or even strange when compared to our current businesses,” according to the announcement – without upsetting the stock market. In fact Google’s shares were up 5% in pre-market trading at time of writing.

The rationale seems pretty sound. Large public corporations tend to become very process driven and focused on the next set of quarterly numbers. This is important, of course, but there also needs to be room for more long term, speculative activities that are hard to justify on a spreadsheet.

Google has always been quite willing to engage in these kinds of activities and Page points to Google Maps, Chrome, and Android as evidence that they’re worth doing. Of course there have been many failures too, like Google+, but such is the nature of speculative activity. What seems inevitable, however, is that if a company focuses exclusively on extracting maximum profit from proven activities it will eventually wither and die.

So old Google, which is now owned by Alphabet, now has former head of products such as Chrome and Android Sundar Pichai as its CEO. Among the companies that will no longer come under the Google umbrella are Fiber (although it’s not yet know what the plan is for Google Fi), Nest, Google’s investment vehicles and Google X, which is currently responsible for the most out there stuff like self-driving cars, internet balloons and Google Glass.

Page and Brin will oversee all of this like benign patriarchs, with Page as CEO, and more concerned with day to day stuff like capital allocation and quarterly reporting, which President Brin gets to spend more time with the boffins, inventing new stuff, which could well include further forays into telecommunications. Here’s Page’s summary of how super excited he is about the move.

“We are 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 we see.
  • Improving the transparency and oversight of what we’re doing.
  • Making Google even better through greater focus.”

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