Google is Now Alphabet: What Does it Mean for Investors?

Google (NASDAQ:GOOG,NASDAQ:GOOGL) is now Alphabet — or at least it’s set to become Alphabet’s largest subsidiary. The new holding company was announced by Google co-founders Larry Page and Sergey Brin on Monday, causing a spike in Google’s share price during after-hours trading.
Class C shares of the company (GOOG) were up 5.88 percent in after-hours trading, while class A shares (GOOGL) were up 6.1 percent. Alphabet will replace Google as the publicly traded entity, although both classes of shares will continue to trade under the same symbols on the NASDAQ.
The company will be “a bit slimmed down” under the Alphabet umbrella. It will keep Google’s main businesses, such as search, advertising and YouTube, within Google, while other parts of the business, such as its efforts in life sciences and longevity, will be made into new entities under the Alphabet umbrella. Google’s X lab, which houses new endeavors being explored by Brin and Page, will also be its own company within the group.
“This new structure will allow us to keep tremendous focus on the extraordinary opportunities we have inside of Google,” said Page in Monday’s announcement. He explained that he and Brin chose the name Alphabet as it means “a collection of letters that represent language, one of humanity’s most important innovations.”
Page will serve as CEO for Alphabet, while Brin will be president of the company and Eric Schmidt will serve as chairman. The co-founders also announced the appointment of Sundar Pichai as CEO of Google; Pichai was previously senior vice president of Google and head of all of the company’s most important products, as per TechCrunch.

So what does the change mean for tech investors? According to The Guardian, it means a clearer picture for investors when it comes to how much money is being spent on Google’s higher-risk projects. That certainly makes sense, as Page stressed that companies under the Alphabet umbrella will make a go of it independently, without having to be tied to Google.
However, Peter Cohan at Forbes notes that even though some of Google’s riskier enterprises will now be separate under Alphabet, investors still can’t choose between Google’s more stable businesses and the company’s more ambitious ventures. That’s because all of those businesses will still trade under Alphabet.
“Is this game of musical chairs a reason to buy the stock? Probably not,” stated Cohan.
Still, the author is positive on the fact that Page and Brin will head up the new holding company, and that Pichai will be appointed CEO of Google. “If Pichai is good at running the money-making part and Page and Brin are able to turn their science projects into new businesses, then Alphabet’s value — still trading as GOOGL and GOOG — will rise,” he said.
The reorganization will take place “later this year,” as per Google’s SEC filing. Alphabet will begin reporting financial results under the new structure for Q4 2015.
 
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.