Analysts say company will be more transparent and accountable after it announces plans to restructure as Alphabet
Google’s investors have given the internet giant’s shock restructuring a clear vote of confidence, sending shares close to an all-time high on Tuesday.
Larry Page, Google’s chief executive, announced that the company would be split up into separate units on Monday, with its divisions all owned by a new parent entity named Alphabet.
The radical move is designed to make the sprawling technology company, which has branched out into fields such as robotics, medicine and home appliances in recent years, more transparent, and will see Mr Page take a step back from Google’s day-to-day operations.
As Wall Street opened on Tuesday, Google’s shares climbed 5.6pc. Analysts applauded the company’s refresh, saying a new structure would mean Mr Page revealing more about his priorities and Google’s financial performance.
In recent years, Google has ramped up spending on ambitious projects, and investors have clamoured for it to be more clear about its costs. Ruth Porat, the company’s chief financial officer whojoined from Morgan Stanley this year, has promised to make it more accountable.
Under the new structure, the company’s core internet advertising business, which includes its search engine, Android smartphone software and YouTube video service, will be just one subsidiary of Alphabet. Other units, such as its research lab Google X, internet provider Google Fiber, and life sciences division Calico, will be separately incorporated, with their own chief executive.
Google shareholders will become investors in Alphabet, and the parent company will publish both its own financials and that of the core business, which will be run by highly-respected Google executive Sundar Pichai and retain the Google name.
Mr Page and Sergey Brin, who co-founded Google two decades ago while at university, will be chief executive and president of Alphabet respectively.
“This event will at the very least help investors better assess the revenue growth trajectory, as well as the capital intensity of the company’s more mature versus emerging businesses,” analysts at Credit Suisse said.
“We continue to think an era of more disclosure and cost consciousness… is positive for Google,” said technology specialists Pacific Crest.
Google’s shares fell back slightly to trade up 3.6pc later in the day.