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Google Announces Restructuring Under Parent Company 'Alphabet'

Google on Monday unveiled its new parent company, the publicly traded "Alphabet," as part of a groundbreaking restructuring effort.

The move, which Google co-founder Larry Page detailed in a blog post, is the largest restructuring in the company's history and a major organizational change for any company its size. Alphabet will become the corporate parent of Google, Calico, Xlab and the Google venture capital business.

Page will lead Alphabet as its CEO, while fellow co-founder Sergey Brin will be its president. Sundar Pichai, who was most recently the head of the Android division, will take over as CEO of Google.

Ruth Porat, who recently took over as Google's CFO, will assume that role at Alphabet.

The creation of Alphabet is aimed at separating Google's core search and cloud businesses from other units, such as its investment companies, its Calico life sciences business, and Xlab, the incubator for new technologies like drones.

"Our company is operating well today, but we think we can make it cleaner and more accountable," Page wrote in the blog. "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. We'll also make sure we have a great CEO for each business, and we'll determine their compensation. In addition, with this new structure we plan to implement segment reporting for our Q4 results, where Google financials will be provided separately than those for the rest of Alphabet businesses as a whole."

Details of the new organization are still unfolding but it appears Google is looking to provide a new reporting structure to make its business more attractive to investors. Page said that by leading Alphabet, he and Brin can focus more on emerging businesses while turning Google over to Pichai.

The name of the parent company has raised some eyebrows. "We liked the name Alphabet because it means a collection of letters that represent language, one of humanity's most important innovations, and is the core of how we index with Google search," Page said. "We also like that it means alpha-bet (Alpha is investment return above benchmark), which we strive for."

Page emphasized that the goal isn't to establish Alphabet as a consumer brand. "The whole point is that Alphabet companies should have independence and develop their own brands," he said.

About the Author

Jeffrey Schwartz is editor of Redmond magazine and also covers cloud computing for Virtualization Review's Cloud Report. In addition, he writes the Channeling the Cloud column for Redmond Channel Partner. Follow him on Twitter @JeffreySchwartz.