Internet search and ad giant Google Inc. has recently announced that it will be creating a parent company called Alphabet Inc. It is intended to be a holding company for its different businesses. It will reorganize the company’s many different divisions and separate its highly profitable Internet search business from its other not so profitable ventures.
Many investors have been clamoring for the Internet search giant to reducing it many less profitable ventures and focus into its many profitable ones. As Google Inc., this seems to have an effect on the company balance sheet as some of the profits Google enjoys trickle down to minimize the losses on the other ventures. With the announcement of Alphabet Inc., the company will now be able to separate its profitable businesses from the less profitable but innovative ones, a move which will appease its investors. Under the Alphabet Inc. umbrella, each company will operate as different entities and therefore will show investors and the market a clearer picture of whether each one is making money or not.
In the new setup, there has also been a reorganization of management and leaders. Alphabet Inc. will be run by current Google CEO Larry Page in the same function and co-founder Sergey Brin will serve as its President along with CFO Ruth Porat. The Google subsidiary will now be handled by Sundar Pichai, a long time Google executive. The other ventures of the company will also be managed separately. Alphabet Inc. will also replace Google as the public traded entity. All Google shares will automatically convert into the same number of Alphabet shares.