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Daily Archives: August 19, 2015

What is the Real Thought behind Google Alphabet?

The rumors of Google going to plan a major makeover came very early. Some might have the feeling, what is the need for separating things out of Google? Now Google has become a collection of companies, managed by a core company called Alphabet. But it doesn’t mean the brand Google is taken over, it is still one of the largest company that stays under the core Alphabet comprising search, maps, Apps, You Tube, Advertising and Android. The remaining endeavors that is housed under Alphabet includes Nest thermostat, the moonshot x lab, the fiber internet service, and Google capital.

What does this really mean?

Google always defies better comparison. They don’t have the plans to become like Berkshire anyway. The logic is entirely different, the focus is moving towards investors without hurting the actual theory of what Google exactly is. When you think of what has brought this idea into Google’s founders, you will clearly understand one thing. This whole change is in response to the stagnant share price and of course to an extent the uneasiness faced by investors too.

Experts have been speculating about this change, but Google has made it very clear to everyone that they are going to focus more on big projects. Whether this will work out or not, we will have to wait and see. But the argument is, as if for now at least Google’s theory is more importantly to funnel the profits that they are making from search and also through advertising to bring more talent and to explore the way they really want. The focus is definitely shifting there is not much argument in that anyway.

Investors take on this entire makeover?

It seems like investors still have some kind of uneasiness in this new strategy but anyway they have to come in terms with this change too. Lary Page and Sergey Brin have come up with a corporate regime in which they have stressed on the fact, the pressure for change by the shareholders.

It was quite evident that they have to take measures as the growth was on the decrease, search engine advertising was slowing considerably and dissatisfaction of investors has brought the stock price stagnant too. These plans were always on cards for the past few months, Google took some initiatives in this time period to rein in at least some of the investments, reducing the expenses. And the direction was set clear, it’s going to be a new beginning with lot of objectives in mind, Google expects investors will be satisfied with this measure.

The big concern of analysts and the relevant change

Analysts were always under pressure due to Google’s structure itself. The businesses that they were managing was really hard to do any evaluation. The core business areas of Google were never transparent. The returns that they use to get from search engine and advertising were hard to observe, as the new business keeping pouring upon them. Now, they have got an all new strategy, which ensures there will be some kind of in-dependency for Google businesses.

Investors will keep pushing for more from now on. The response for Google Alphabet as if for now is quite good, the stock price had a climb of 6%. And to my opinion, it might stay the same for a longer term by seeing the current trend. It is obvious that when the transparency increases, there will be more discipline and greater accountability.

But this have a disadvantage too, the new form that has made things more transparent will also highlight some kind of disconnect between businesses of Alphabet. And it’s also hard to explain why these businesses are combined together. The change has not stopped investors in buying collection of projects anyway. When it comes to simultaneously investing in search engine, thermostats, research and drones, Alphabet really stands out. It allows to make investment in a much better transparent way but the biggest challenge in front of the company is convincing the investors.

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