Google to become a subsidiary of Alphabet Inc.

Who would’ve expected Google to become anyone’s subsidiary? But that’s what happened Monday.

Google announced a new corporate operating structure, creating a new company, Alphabet, that will count the Internet giant as a subsidiary. Sundar Pichai, currently a senior vice president in charge of Internet businesses, will become CEO of Google. Current chief executive Larry Page will take the same post at Alphabet and run the company with co-founder Sergey Brin.

“This new structure will allow us to keep tremendous focus on the extraordinary opportunities we have inside of Google,” Page wrote in a blog post Monday.

 

Alphabet will become the company’s publicly traded entity starting in the fourth quarter, breaking out Google unit earnings in quarterly results. All shares will convert into Alphabet stock, with the two classes continuing to trade under the tickers GOOGL and GOOG.

Google’s Class A shares jumped more than 5 percent on the news.

Alphabet will contain businesses “far afield” from the company’s core Internet products—including Google X, Fiber and Life Sciences, Page said. Google in recent years has funneled money into projects such as drone delivery, self-driving cars and health systems.

“Fundamentally, we believe this allows us more management scale, as we can run things independently that aren’t very related,” Page wrote.

Both Chief Financial Officer Ruth Porat and Nest’s Tony Fadell will report to Page. Video service YouTube will remain part of Google. The website for Alphabet is now listed as abc.xyz.

Google last month posted second-quarter earnings of $6.99 per share on $17.73 billion in revenue, an 11 percent increase year over year. Class A shares have climbed about 20 percent this year.

 

CNBC