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I find it also interesting the non - Google companies: Businesses such as Calico, Nest, and Fiber, as well as its investing arms, such as Google Ventures and G
by yRetsyM 11y ago
I find it also interesting the non - Google companies:
Businesses such as Calico, Nest, and Fiber, as well as its investing arms, such as Google Ventures and Google Capital, and incubator projects, such as Google X, will be managed separately from the Google business.
Fiber is the most notable to me - seems they see this as more than an experiment and are looking to expand.
YouTube not separating is an interesting one to me, I expected that to be separate.
- tenoman 11y agoI think the idea was to keep anything related to ad revenue all together under Sundar, and Youtube is definitely a part of that.
- ariwilson 11y agoOr "web services" in general.
- cptn_brittish 11y agoIt seems to me that Google is now the software arm and everything else is spun off into its individual niches.
- Spooky23 11y agoFiber is the hint about what this really means. Capital intense businesses like ISPs or car companies are expensive to operate and the financials would drag down Google. In this model, the big shareholders get to dilute risks in these ventures, while retaining the ability to exponentially increase their personal wealth.
- vonmoltke 11y agoThis reorganization makes no difference on the financials. The release explicitly stated the company is trading at the conglomerate level.
- S4M 11y agoYes, I guess the ones that are getting affected are the Google (not Alphabet) employees, since now it must be much more complicated for an engineer working on a Google project to be transferred to something more sexy such as the Self Driving Car. Disclaimer: I don't work at Google and don't know anybody who does, so I might be totally off.
- trhway 11y agoi guess the employees will now also get a clear feel who of them is "maker" and who is "taker" :) By the way - who is inheriting the piles of money accumulated in the tax heavens? I think that is another elephant in the room. The GoogleX+Fiber+... is obviously a money hungry black hole, so would they be able now to redirect/invest this money from abroad straight into hat loss generating business without incurring the taxes?
- joshstaiger 11y agoOnly if it is invested offshore. If it comes back to the US, it will be taxed. Same situation as before.
- moritzplassnig 11y agoIt will have an impact - they will break out the Google Financials in Q4 & overall be more transparent about the different projects.
- Spooky23 11y agoIt will when Google is manufacturing cars, or is joint venturing with a car company to manufacture them. The Google guys are smart. You don't do something like this without a long term strategic aim.
- toomuchtodo 11y agoThere was speculation on the last Tesla call that they're going to do another equity round (to which Elon said he couldn't comment). Would be interesting if this was part of the strategy, as Tesla is extremely capital intensive at the moment with the gigafactory and other manufacturing spend. Google almost did acquire Tesla before it's successful Hail Mary in 2013, so the idea isn't without merit.
- arihant 11y agoI don't think there would be a difference on financials. Alphabet is worth exactly as the old Google, and is currently operating exact same businesses. Separating Fiber is important for other reasons, most notably, saving themselves from conflict of interest/anti-trust lawsuits.
- eldavido 11y agoNo it isn't. Clearly Google's management believes the new structure is accretive to shareholder value otherwise they wouldn't have done it. I really wonder about this though. Conglomerates have a mixed track record [1] and from where I sit, it's not clear Larry/Sergey are better capital allocators than the public markets. [1] Brealey & Myers "Corporate Finance" has a good section on this topic, comparing big Asian conglomerates like Samsung, LG, Yahama, etc. to American public companies over time.
- Aloha 11y agoRegulatory costs can be an huge drain on long term profits, and I'd count anti-trust as a regulatory cost.
- setpatchaddress 11y agoNope. If there's an antitrust issue (I'm not saying there is), it's still all the same company to the DOJ. Google is too visible to play that particular shell game and get away with it. If this was in preparation for spinning Fiber off, sure.
- T2_t2 11y agoWhich might make sense. Perhaps more broadly, they see the advertising entities as a whole that is complete, e.g. the value of these is strong, and not likely to be anything more than incremental (in the case of Youtube, that increment is still likely thousands of percents) nor to need any capital or debt for the foreseeable future. Fiber, cars et al could be spun off, which would create share holder value without dividends, and allow these units to leverage debt rather than capital. Cars, Fiber, the WiFi balloons, could all be spun off at a point where they need capital and debt, and not drag down Alphabet. Fiber with an IPO and access to debt as its own needs dictate might grow a lot faster than fiber waiting for capital from Google. Maybe that is Google's plan: get them ready for IPO, then set them free and take an interest?
- mathattack 11y agoI interpret it as keeping the ad machine separate from everything else. If product decision impact ad revenue, they stay in (G)oogle. Everything else moves to different arms. My guess is this serves 3 benefits: 1 - Less turf wars. 2 - Better visibility to investors on where the money is. 3 - Ability to spin off pieces as needed. Many companies resist this type of visibility because they don't want a Carl Icahn to come in and demand a spinoff. The share structure of Google/Alphabet precludes this from happening.
- toomuchtodo 11y agoTransparency is easier when you have control (Class A versus Class C shares). I'm surprised more largish tech companies haven't followed along to not be at the whim of WallStreet and other short-term outlook players.
- mathattack 11y agoHere's the thing... Many companies are actually poorly run. For most of them, Wall Street does the dirty work of forcing them to relinquish their money to more productive efforts. (Think of all the bloated monopolies who used to have fleets of corporate jets and crazy perks) No extreme is right or wrong.
- carbocation 11y agoAren't the Class B shares the major voting shares, with 10x as many votes per share as Class A (10 vs 1)?
- Bedon292 11y agoCorrect: Class C - 0 Votes (GOOG) Class A - 1 Vote (GOOGL ~4% higher cost per share) Class B - 10 Votes (Not publicly traded)
- toomuchtodo 11y agoCan Class B shares be traded privately between individuals? Or do they have conditions attached (right of first refusal back to founders/company, etc)?
- pkinsky 11y ago>Calico A clean line between Calico and the advertising business can only be a good thing. Hopefully this means they can get on with analyzing every genome they can get their hands on.
- JoshTriplett 11y agoI wonder if that'll include Google Fi, and if that'll be separate or go into the same subsidiary as Fiber.