5 things you need to know about Google and Alphabet
- 14 August, 2015 07:53
With Google restructuring its business and moving under the umbrella of new parent company Alphabet, executives may be trying to get back some of their old start-up swagger.
The restructuring will bring a lot of changes to what is easily one of the world's most well-known companies. But company officials haven't offered any information about the move since co-founder Larry Page offered up a blog post Monday.
So what does all of this mean for users and for the industry?
Jeff Kagan, an independent industry analyst, said Google's move is akin to a "middle-aged facelift." What's unclear is just what that will entail.
With that in mind, here are the five things you should know about Google's restructuring:
"I don't think there will be changes to product," said Brad Shimmin, an analyst with Current Analysis. "All the road maps they have in place will continue. At least for the foreseeable future, which is about 18 months in this industry, all the plans Google has had in play will remain."
It's simple: Things like search and Android have been the money makers for Google. The company has no reason to shake them up.
"Companies periodically have to go through restructuring to position themselves for the future," said Scott Strawn, an analyst with IDC. "This isn't about product. This is just the way the business world works.... I don't see any real product changes right now."
Let Google be Google
Google executives will no longer be splitting their attention between search and high-altitude balloons, or between Android and funding startups. Instead, they can focus on the products and services that make money for the company -- and that should mean more advances in those areas and more agility against competitors.
"It allows Google, the Internet property, to be more fiscally responsible and focused on what that company does," said Shimmin. "Because they were pulled in so many different directions, [co-founders] Sergey [Brin] and Larry [Page] had a lot to contend with, in terms of prioritization and coordination. Leaving Google on its own should make the company more successful because executives won't have to worry about so much else. They won't have to worry about the success of Google Glass and how they might affect the whole business."
More Moon shots
The restructuring also means that Google's research projects will get their own executives and their own singular attention.
Relieved of the hefty administrative chores related to managing the Google colossus, the company's research arm can give more attention to things like Internet connectivity balloons, Google Fi and wearables.
"This new structure could help focus the founders' attention, and resources, on all of the much smaller companies and technologies that Google has either purchased or developed over the past several years," said Dan Olds, an analyst with The Gabriel Consulting Group. "We could also see these ancillary businesses receive more authority to make decisions on their own, which could drive quicker innovation and greater consumer impact."
Shimmin agreed, adding that Alphabet companies like Google X, which has been behind projects like Glass and driverless cars, will have more freedom under the new business structure.
"They won't have to worry about pulling resources away from their responsible revenue-making entities," he said. "Research will have its own set of finances. This lets the big multinational company sit separately, while the small, start-up-like entrepreneurial parts are set free. If they're going to have the focus to do more research, we'll see some innovations that have greater vision to them."
A happier Wall Street?
Wall Street's big investors are hopeful that the restructuring means they'll get a clearer look at how the company spends its money and where these different research projects are heading.
For some time, Wall Street has been pushing Google to be more transparent financially. How much is it spending on high-altitude balloons and drones? What is the expected revenue for Google Glass?
The company, despite Wall Street's insistence, has been mum on the subject. Now, though, that could change.
All of the businesses underneath the Alphabet umbrella should provide more financial information. Alphabet is expected to segment out its financials by its fourth-quarter earnings report, which should make Wall Street happy and could boost Alphabet's stock.
"This is Google becoming more transparent," said Kagan. "They were never really transparent and that has been causing them to stumble.... Google is a Silicon Valley creation. Everyone in Silicon Valley loves the young. Google has been growing and getting older, less youthful. This will hopefully help Google look more youthful to investors, workers, users and partners."
Google's new chief
As part of the restructuring, Sundar Pichai, who had been a vice president at Google overseeing Android, Chrome and Google apps, has been named CEO of the new trimmer Google.
"This is the man," said Shimmin. "This is the guy who brought us Android and the guy who has already basically been running their biggest cash cow. He's very charismatic and he's definitely [at the] CEO level of competence and swagger that you would expect to see from a company like Google. I think he's the perfect choice."
For a man who already has had so much success at Google, Pichai now can run Google's core businesses without having to figure out how other projects fit in and how to relate them to the board of directors and stock holders.
"With Pichai at the helm, I am hoping to see a Google more focused on all things Google as we've known it," said Patrick Moorhead, an analyst with Moor Insights & Strategy. "Pichai will need to make yet another run at being successful in social media, which has eluded Google so far."