6 ms·

This reorganization makes no difference on the financials. The release explicitly stated the company is trading at the conglomerate level.

S4M 11y ago
Yes, 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 ago
  i 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 ago
    Only if it is invested offshore. If it comes back to the US, it will be taxed. Same situation as before.
moritzplassnig 11y ago
It will have an impact - they will break out the Google Financials in Q4 & overall be more transparent about the different projects.
Spooky23 11y ago
It 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 ago
  There 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.
- johnchristopher 11y ago
  What about this post from a month ago https://news.ycombinator.com/item?id=9889942 https://news.ycombinator.com/item?id=9889942 > There is no strategy. The thought of Google having a central product management strategy -- and successfully executing it across many teams -- is hilarious to people who work there. It's chaos that outsiders try to read into. This is a consequence of bad internal economics and incentives. Google PMs and engineers are incentivized to create new products and ship them by quarterly deadlines (perf/promo cycles) rather than align their teams towards a cohesive user experience. Thinking this way would occasionally cause teams to, gasp, not build a product they wanted to build. Everyone needs to ship something, ideally something new. After all, you don't get promoted for deciding not to build something. I've seen awful products/implementations go out the door and get killed or reimplemented soon thereafter. And people still list these as "achievements" on promotion packets (and they get promoted despite the product failing!). The company is kind of trying to address this by changing promotion criteria, but it's culturally ingrained and won't change for some time.
  - fixermark 11y ago
    It's one anon's opinion based on their observation and may not be reflective of a larger reality.
001sky 11y ago
While you are right in your comment, in so far as what you have written, the implication that [this] "reorganization makes no difference on the financials" is not strictly speaking true. Going forward, this re-organization may very well allow capital allocation to be done at various legal entities a-la project or structured finance. That way, the risk/return of the various projects can be traded on more efficiently to the benefit of both investors and google/alphabet shareholders. This is relevant in the larger context for asset intensive, long-time maturity investment areas --like fiber, self driving cars, etc -- that have fundamentally different economics than the core business (search/ads/youtube etc).
- anjc 11y ago
  > That way, the risk/return of the various projects can be traded on more efficiently to the benefit of both investors and google/alphabet shareholders. How would this make any difference for the costing of projects (or businesses, now)? In terms of risks and returns. Its not like new businesses under Alphabet will be boostrapped, they'll still be the same drain/boon on resources that they always were.
  - SapphireSun 11y ago
    Not if they allow sub-ventures to be financed semi-independently.
- eldavido 11y ago
  This is a good point in an otherwise PR- and spin-heavy announcement. If Google plans to pursue capital-intensive projects a la Fiber, it'd be better to have those separated to allow use of (much cheaper) debt capital collateralized by very narrow slices of the business. Is this what you mean by "project finance"? I've heard that term before but not sure what it means.
anjc 11y ago
Google could go public though, right? (The new Google)
- xbmcuser 11y ago
  It wont as they dont need it to Google Fiber on the other hand need capital investments so probably will.
- justincormack 11y ago
  No they need the cash it produces to finance the rest of the businesses.
  - dragonwriter 11y ago
    They could get that through dividends even if Google went public.
- deleted 11y ago
  [deleted]
fredkbloggs 11y ago
Right, this is about power. Specifically, it makes clear that Larry and Sergei are now in the capital allocation business. When you buy a share of Alphabet, you are buying shares in Larry and Sergei's opinion about what should be done with money. If you think they're much better at spending money than you are, this is a great opportunity. If you don't, it isn't.
- chetanahuja 11y ago
  Well you're still mostly investing in the growth potential of Google's existing businesses. Don't forget that Alphabet still completely owns all the money-making businesses of Google.
  - fredkbloggs 11y ago
    Wrong. You cannot have your profits and let someone reallocate them for you too. You would be right if you owned a controlling interest, but you don't. Because you don't, all the profits of the money-making businesses go where Larry and Sergey want them to go. That's not (necessarily) going to be your pockets. If you owned a controlling interest, you could throw them out if you're unhappy with their performance as capital allocators, but you don't and you can't. So those profits are worth little or nothing to you, both now and in the future, because you aren't entitled to receive them.
    - hluska 11y ago
      This is only true if: a) Neither executive nor any member of the board has any concept of fiduciary duty. b) They can keep any mismanagement out of audited financial statements.
      - fredkbloggs 11y ago
        Malice is not required. All they have to do is be wrong.
    - mattlutze 11y ago
dragonwriter 11y ago
> This reorganization makes no difference on the financials. In the short term, it doesn't. But it may be preparation for something in the longer term that does.

S4M 11y ago

Yes, 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 ago
i 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 ago
  Only if it is invested offshore. If it comes back to the US, it will be taxed. Same situation as before.

moritzplassnig 11y ago

It will have an impact - they will break out the Google Financials in Q4 & overall be more transparent about the different projects.

Spooky23 11y ago

It 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 ago
There 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.
johnchristopher 11y ago
What about this post from a month ago https://news.ycombinator.com/item?id=9889942 https://news.ycombinator.com/item?id=9889942 > There is no strategy. The thought of Google having a central product management strategy -- and successfully executing it across many teams -- is hilarious to people who work there. It's chaos that outsiders try to read into. This is a consequence of bad internal economics and incentives. Google PMs and engineers are incentivized to create new products and ship them by quarterly deadlines (perf/promo cycles) rather than align their teams towards a cohesive user experience. Thinking this way would occasionally cause teams to, gasp, not build a product they wanted to build. Everyone needs to ship something, ideally something new. After all, you don't get promoted for deciding not to build something. I've seen awful products/implementations go out the door and get killed or reimplemented soon thereafter. And people still list these as "achievements" on promotion packets (and they get promoted despite the product failing!). The company is kind of trying to address this by changing promotion criteria, but it's culturally ingrained and won't change for some time.
- fixermark 11y ago
  It's one anon's opinion based on their observation and may not be reflective of a larger reality.

001sky 11y ago

While you are right in your comment, in so far as what you have written, the implication that [this] "reorganization makes no difference on the financials" is not strictly speaking true. Going forward, this re-organization may very well allow capital allocation to be done at various legal entities a-la project or structured finance. That way, the risk/return of the various projects can be traded on more efficiently to the benefit of both investors and google/alphabet shareholders. This is relevant in the larger context for asset intensive, long-time maturity investment areas --like fiber, self driving cars, etc -- that have fundamentally different economics than the core business (search/ads/youtube etc).

anjc 11y ago
> That way, the risk/return of the various projects can be traded on more efficiently to the benefit of both investors and google/alphabet shareholders. How would this make any difference for the costing of projects (or businesses, now)? In terms of risks and returns. Its not like new businesses under Alphabet will be boostrapped, they'll still be the same drain/boon on resources that they always were.
- SapphireSun 11y ago
  Not if they allow sub-ventures to be financed semi-independently.
eldavido 11y ago
This is a good point in an otherwise PR- and spin-heavy announcement. If Google plans to pursue capital-intensive projects a la Fiber, it'd be better to have those separated to allow use of (much cheaper) debt capital collateralized by very narrow slices of the business. Is this what you mean by "project finance"? I've heard that term before but not sure what it means.

anjc 11y ago

Google could go public though, right? (The new Google)

xbmcuser 11y ago
It wont as they dont need it to Google Fiber on the other hand need capital investments so probably will.
justincormack 11y ago
No they need the cash it produces to finance the rest of the businesses.
- dragonwriter 11y ago
  They could get that through dividends even if Google went public.
deleted 11y ago
[deleted]

fredkbloggs 11y ago

Right, this is about power. Specifically, it makes clear that Larry and Sergei are now in the capital allocation business. When you buy a share of Alphabet, you are buying shares in Larry and Sergei's opinion about what should be done with money. If you think they're much better at spending money than you are, this is a great opportunity. If you don't, it isn't.

chetanahuja 11y ago
Well you're still mostly investing in the growth potential of Google's existing businesses. Don't forget that Alphabet still completely owns all the money-making businesses of Google.
- fredkbloggs 11y ago
  Wrong. You cannot have your profits and let someone reallocate them for you too. You would be right if you owned a controlling interest, but you don't. Because you don't, all the profits of the money-making businesses go where Larry and Sergey want them to go. That's not (necessarily) going to be your pockets. If you owned a controlling interest, you could throw them out if you're unhappy with their performance as capital allocators, but you don't and you can't. So those profits are worth little or nothing to you, both now and in the future, because you aren't entitled to receive them.
  - hluska 11y ago
    This is only true if: a) Neither executive nor any member of the board has any concept of fiduciary duty. b) They can keep any mismanagement out of audited financial statements.
    - fredkbloggs 11y ago
      Malice is not required. All they have to do is be wrong.
  - mattlutze 11y ago

dragonwriter 11y ago

> This reorganization makes no difference on the financials. In the short term, it doesn't. But it may be preparation for something in the longer term that does.