Alphabet Shakeup Spells Change for Google: What You Need to Know

PHOTO: A Google sign hangs on their headquarters, May 21, 2014, in New York.PlayPreston Rescigno/Getty Images
WATCH Alphabet Shakeup Spells Change for Google

Google has always been a search engine and advertising business at its core but over the years it's grown into a company with diverse interests ranging from self-driving cars to home automation systems. The decision to slim down Google and make it a subsidiary of the newly created Alphabet is intended to allow each company to focus on what it does best.

Larry Page will serve as CEO of Alphabet, with fellow Google co-founder Sergey Brin as president. In a blog post announcing the change, Page said that Google is "operating well today, but we think we can make it cleaner and more accountable."

Here's a look at the biggest changes of the reorganization.

What's Part of a Slimmed-Down Google

Google will be solely focused on the company's core Internet businesses, including search, advertising, maps, YouTube and the Android operating system. Sundar Pichai, who has effectively been leading Google's day-to-day operations, will step into the CEO role.

What It Means for Investors

Google's move under the Alphabet umbrella won't affect traders. Google shares will convert into Alphabet shares, though they will continue to trade on NASDAQ as GOOGL and GOOG.

After the new operating structure is finalized in the coming months, investors can expect two segments for financial reporting beginning in Q4, with the slimmed down Google broken out separately from the other Alphabet businesses, which will be reported as a whole, according to an SEC filing explaining the reorganization.

What Else Is Under the Alphabet Umbrella

Larry Page, who is now the CEO of Alphabet, said "companies that are pretty far afield of our main internet products" will be separated from Google and become a part of Alphabet.

Google X, the semi-secret incubator that has spawned projects such as self-driving cars and Wing, a drone delivery service, will move to Alphabet. Other companies under Alphabet's control will be Nest, the connected home products company; Fiber, Google's high-speed Internet service; Google Ventures and Google Capital.

Alphabet's Role as a Parent Company

Each business unit under the Alphabet umbrella will be run by a CEO, with Page and Brin determining their compensation.

"We will rigorously handle capital allocation and work to make sure each business is executing well," Page wrote in a blog post. "The whole point is that Alphabet companies should have independence and develop their own brands."