Google Inc (NASDAQ: GOOGL) surprisingly announced a major reconstruction of its operating structure by creating a holding company – Alphabet, for managing multiple subsidiaries and separating core business - online advertising – from the new projects, such as cars without driver.
Alphabet Inc will replace Google as a publicly traded company, and all of Google shares will be automatically converted into the same number of shares in the Alphabet with All rights reserved.
The decision of the search giant looks like an attempt to focus on more creative and ambitious projects and met the approval of investors who expect more transparency in the various business segments of Google.
"This indicates that, probably, Google won’t reduce the rate of experimental processes such as self-managed vehicles," - said Michael Yoshiko, the head of Destination Wealth Management, managing assets of $ 1.5 billion.
On this surprise news, Google shares rose 7 % to $ 708.
The new structure would also give Wall Street a better understanding of investments in technology projects such as Google X, a secret laboratory that produced Google Glass, the smartphone headset that resembles eyeglasses.
"They realized that they have a hodgepodge of companies" - said Roger Kay, an analyst of Endpoint Technologies Associates.
"Maybe it is a little better for them to understand and clarify which promise profits, which are the research projects, and on what you can bet in the long run."
The company, established in Mountain View, California in 1998 by Larry Page and Sergey Brin, has grown from an internet search tool into a giant conglomerate with 40 000 employees around the globe.
The Google planned structure resembles the way that went to companies such as Berkshire Hathaway and General Electric (NYSE: GE).
As part of the reorganization of the division under the name of Google, there will be included the main search engine, Google Maps, and YouTube.
In addition to the Google X, the new venture projects such as Calico, which focuses on the study of longevity and home devices manufacturer, Nest, will be managed separately. The new structure will include the provider of broadband Internet access – Fiber, venture capital division of Google Ventures, as well as Google Capital.
"The new structure will allow us to continue to focus on the extraordinary opportunities that we have within Google", - Page wrote in his blog.
He will lead the Alphabet. Breen will become president of the new company, and all the current top management will get leading positions in the Alphabet.