Google (NASDAQ:GOOGL) (NASDAQ:GOOG) announced a new operating structure that will see a new parent company named Alphabet, with Google as one of its operating units. Shares jumped in morning trades.
Google said late yesterday that it would split into two reporting companies under the new holding company called Alphabet.
One will hold its core search and Web advertising business, and the other its newer ventures such as driverless cars and Internet-connected thermostats made by its Nest business. The new structure will give greater clarity into how Google invests in various ventures. Investors will now get more details on how the businesses are operating, a longstanding concern on Wall Street.
Shares climbed as much as 6 percent in morning trades. The stock had rallied 25 percent since the beginning of the year through the close of regular trading yesterday, giving the company a market value of $444 billion.
Alphabet will be run by Google co-founders Larry Page and Sergey Brin. Google, which will become a subsidiary of Alphabet, will have a new CEO: top Google executive Sundar Pichai.
"Our company is operating well today, but we think we can make it cleaner and more accountable," Page wrote in a post to the official Google blog. “What is Alphabet? Alphabet is mostly a collection of companies. The largest of which, of course, is Google. This newer Google is a bit slimmed down, with the companies that are pretty far afield of our main Internet products contained in Alphabet instead.”
The goal isn’t to make Alphabet a consumer brand, Page said.
Google shares will automatically convert to Alphabet shares later this year. Shareholders will retain the same rights. The Mountain View, California-based company will continue to trade under the tickers GOOGL (for the Class A shares that carry voting rights) and GOOG (Class C shares with no voting rights).
Starting in the company’s fourth-quarter earnings report Google financial results will be reported separately from Alphabet as a whole.
Google shares were upgraded by both Stifel Nicolaus and Mizuho following the announcement.