Google Inc. is changing its corporate structure to separate its search, YouTube and other Web companies from its research and investment divisions.
The shares rose as much as 5.8 percent in extended trading after the company said Alphabet Inc. will be the name of what will effectively be a new holding company. It will include Google Inc. andGoogle Ventures, Google Capital, Google X and other subsidiaries, the Web company said in a blog post Monday.
Larry Page will be Alphabet’s chief executive officer, while co-founder Sergey Brin will be president. Ruth Porat will be chief financial officer. Sundar Pichai, Page’s deputy, will be promoted to become CEO of Google Inc., which generates the bulk of Google’s $60 billion in annual revenue. The goal isn’t to make Alphabet a consumer brand, Page said.
Google is adopting this structure in order to make clearer the difference between its main business and longer-term endeavors, as Page and Brin take on more strategic roles, while leaving operational management to trusted deputies.
“We’ve long believed that over time companies tend to get comfortable doing the same thing, just making incremental changes,” Page wrote in the post. “Our company is operating well today, but we think we can make it cleaner and more accountable.”
Shares of Google fell less than 1 percent to $663.14 at Monday’s close in New York. The stock is up 25 percent this year, with much of the gains coming after the company reported quarterly results last month.
The new structure will be introduced in phases over the coming months. Alphabet will report its results under this new structure commencing with the fourth-quarter earnings release, typically posted in January. With this move, investors will get more details on how the businesses are operating, a longstanding request from Wall Street. Under the change, the core Google company will report separately from the investment and research arms, according to a filing.
“We liked the name Alphabet because it means a collection of letters that represent language, one of humanity’s most important innovations, and is the core of how we index with Google search!” Page said. “We also like that it means alpha- bet (Alpha is investment return above benchmark), which we strive for!”