Google (GOOG) Move to Alphabet is all About Keeping Sundar

Steve Kanaval |

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Larry and Sergey put Sundar Pichai in the CEO role as they roll up all Google related product lines into a parent company called Alphabet. Those of you who have followed the story over the last few years know that Pichai was in the running with Satya Nadella for the CEO job at Micrsoft (MSFT) but lost out. Today's move was a way to secure Pichai for years to come and give Sergey and Larry Page room to view the expanse of projects they have started over the years. I think that we will now see cool projects like Internet balloon satellites, Google Glass and driverless cars accelerate to fruition. This frees up the duo to solve all the problems of the world, and puts the bullseye directly on new CEO Pichai, who is up to the task after showing his skills with any product he touched at Google. Many think he is the most talented product creator since Steve Jobs.

From a trading perspective, little will change, and all Google shares will be equal to what they were before as Google will still trade as symbol (GOOG) and ($GOOGL). However, the nuance comes with accountability for business lines where each manager has a separate business and P&L. 

It is typical of Larry and Sergey to reward internal managers, but the varied projects Google is now involved in creates compensation problems for the company when it comes to reporting. I suspect that whomever the lead analyst is at Goldman Sachs (GS) probably had some input here since they all are seeking simple ways to organize how to report profit or losses. Shares were 5% higher on the news.

In a letter to shareholders, Larry Page said: 

What could be better? No wonder we are excited to get to work with everyone in the Alphabet family. Don't worry, we're still getting used to the name too!"

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.

 And hopefully... as a result of all this, improving the lives of as many people as we can. 

Page went on to say " For Sergey and me this is a very exciting new chapter in the life of Google-the birth of Alphabet. 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! We also like that it means alpha-bet (Alpha is investment return above benchmark), which we strive for! I should add that we are not intending for this to be a big consumer brand with related products-the whole point is that Alphabet companies should have independence and develop their own brands.

The real change is the elevation of Sundar Pichai to CEO, rewarding him for his great work on Chrome, Android and Google Apps. He is a superstar in the world of product development and managing employees,and the founders recognizethat. His great work forced Google to put him in the CEO position, orlose him to Microsoft or another competitor.This was all about Sundar, and shareholders are voting in afterhours with their wallets.

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Companies

Symbol Name Price Change % Volume
GOOGL Alphabet Inc. 764.46 0.13 0.02 1,718,846
GS The Goldman Sachs Group Inc. 223.36 -3.27 -1.44 5,297,420
GOOG Alphabet Inc. 750.50 2.58 0.34 1,452,484
MSFT Microsoft Corporation 59.25 0.05 0.08 25,515,665

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