The Google makeover - What exactly is “Alphabet”?

Before Google announced they were restructuring the firm at 4pm on Monday not many people had heard of Alphabet Inc., a company owned by former Google bosses Sergey Brin, Larry Page and Eric Schmidt.

When the reshuffle is complete, and with the use of some magical corporate sleight of hand, the U.S. search company will be a wholly owned subsidiary of Alphabet Inc. which CEO Larry Page describes rather simplistically as “mostly a collection of firms”.

That definition basically qualifies Alphabet as a holding company, which will not really have any face to face contact with consumers, but will rather act as a mother hen letting her subsidiaries grow beneath her warm bosom, similar to firms like General Electric and the billionaire investor Warren Buffet’s Berkshire Hathaway.

The deal is similar to a high profile restructuring in Japan recently, where investment corporation Sinolink Japan created a subsidiary of a future parent company which it then merged “with and into”. Clear as mud right? Don’t worry…even seasoned investors and traders are confused.

Only one of the companies named under Google’s SEC filing can be classed as a genuine acquisition, the home-automation company Nest. All the others, such as longevity research firm Calico and the company’s experimental division Google X have been founded and managed internally. This is where Alphabet is similar to General Electric, and they are like to be very hands on with the companies under their control.

Berkshire Hathaway, who has less than 30 active employees, would be an example of a holding firm at the other end of the spectrum who don’t have too close a relationship with their daughter firms and basically let the businesses run themselves without too much feedback.

So it’s obvious that Brin, Page and Schmidt will have plenty of work to do taking care of Google. Luckily, they have lots of experience with that.

“All will become clear in the next few days,” said Larry Page in a Bloomberg interview.