Google Has Given Birth to Its Own Parent Company, Alphabet

Sundar Pichai Named CEO of Google

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Credit: Krisztian Bocsi/Bloomberg

Google has gotten so big that it's formed a company to become its own new parent.

Google CEO Larry Page said Monday that he and co-founder Sergey Brin have created Alphabet, which will effectively become a holding company consisting of smaller companies including Google. Mr. Page will take the reins of Alphabet as CEO, Mr. Brin will become president of Alphabet and Google's de facto second-in-command Sundar Pichai is taking over as CEO of Google.

The reorganization appears to be an effort to clarify the lines between Google's core business and its endeavors that aren't directly related to building products against which it can sell ads. Those "other" endeavors include its work to develop contact lenses that can measure people's blood glucose levels, the connected-home business Nest, the internet service provider Fiber, its efforts to extend people's lifespans, its futuristic research division X -- which had developed Google Glass and more recently shifted focus to things like drone delivery -- and its investment arms.

"Fundamentally, we believe this allows us more management scale, as we can run things independently that aren't very related," Mr. Page wrote in a company blog post.

As for Google, things will stay roughly the same -- YouTube and Android, notably, remain part of Google -- except for one big change. Google will now be headed by Mr. Pichai, who had run Google's Android and Chrome businesses before being promoted to oversee all of Google's core products in October 2014.

"I feel very fortunate to have someone as talented as [Mr. Pichai] is to run the slightly slimmed down Google and this frees up time for me to continue to scale our aspirations," Mr. Page wrote. "I have been spending quite a bit of time with Sundar, helping him and the company in any way I can, and I will of course continue to do that."

Mr. Page also explained the reason for naming the new company Alphabet, which will be the publicly traded entity (though it will break out Google separately in its earnings reports).

"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!" he wrote. "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."

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