Introducing Alphabet

Published 12:00 am Tuesday, August 11, 2015

SAN FRANCISCO — Google was born as a company that did Internet search. Over time, it has broadened its interests into everything from drones to pharmaceuticals to venture capital.

Now Google is changing its corporate structure to reflect that it has essentially become a holding company with a disparate collection of businesses.

Larry Page, co-founder and chief executive of Google, said in a blog post Monday he was creating a new company named Alphabet that he would run along with Sergey Brin, the other co-founder of Google.

Alphabet is to act as a parent entity, with several other companies operating under the structure. The biggest among them would be Google. In addition, Alphabet is to house other businesses such as Nest, the smart thermostat maker, and Calico, a company focused on longevity, among others.

“For Sergey and me this is a very exciting new chapter in the life of Google — the birth of Alphabet,” wrote Page in the blog post. “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.”

For Page, the decision to shake up Google’s structure is driven by the desire to reinvigorate the company with an entrepreneurial culture and to give operating divisions more leeway to make their own decisions. The structure is reminiscent of that of Berkshire Hathaway, Warren Buffett’s industrial empire, a giant conglomerate that includes railroads and Fruit of the Loom underwear.

The move also provides more financial transparency. Starting in the fourth quarter of this year, Alphabet, the holding company, will break out financial results for Google Inc., as well as the overall company. Investors will not be able to see individual results for other companies, but it will make it easier to get a sense of how Google’s core business is doing.

Under the new structure, Google will be run by Sundar Pichai as chief executive; Pichai has been Google’s senior vice president in charge of products. Google will encompass most of the company’s Internet businesses such as search, maps, YouTube and applications like Gmail.

Ruth Porat, chief financial officer of Google, will remain in that role and also be chief financial officer for Alphabet.

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