Google announced a major shakeup on Monday.
The company will rename itself Alphabet, while the existing Google business will exist inside this larger structure.
Current Google CEO Larry Page will lead Alphabet, while Sundar Pichai, who leads Google’s product division, will take the reigns as CEO of Google.
Business Insider’s Rob Price put together an overview of the structure here.
Following the announcement, a number of Wall Street analysts chimed in, with at least one arguing that this move created the “Berkshire Hathaway of the Internet.”
In a note to clients, analysts at Stifel were super bullish on the move, writing:
Larry Page and Sergey Brin meet Warren Buffett and Charlie Munger as the Berkshire Hathaway of the Internet emerges for a multi-year stock run, in our view. Today, Google announced plans to create a new public holding company, Alphabet Inc., which will provide reporting for the core Google business as well as its smaller, more speculative segments separately. The company has recently been giving investors exactly what they have wanted, with the strong management team exercising disciplined focus on value creation, and with multiple business units operating with reasonable levels of autonomy. We believe this combination leaves the possibility for shares to exceed the S&P 500 return for many years on the back of this new operating structure.
Other Wall Street analysts, including those at William Blair and Goldman Sachs, said that this move will create increased transparency within the company, as analysts expect broader segment breakdowns regarding revenue and expenses for core and non-core businesses.
But as Business Insider’s Jay Yarow noted last night, current Google CEO Larry Page no longer seemed interested in the nitty-gritty of running a business like Google, which is an advertising and product company.
As Jay wrote, Page, “wants to see big fat honking changes happen in the world,” not run a $US400 billion behemoth. This move then, in essence, seems aimed at giving Page the space to do what he wants while keeping the moneymaking Google operation entirely intact.
And so problem with the Berkshire Hathaway comparison, is that things like Calico and X Labs — which Page seems more excited by and are housed inside the Alphabet umbrella, like Google — are more experimental, and almost by design, not big moneymakers.
Berkshire Hathaway, in contrast, just spent more than $US35 billion to buy Precision Castparts, which makes parts for aeroplanes and oil pipelines and had revenue of $US2.4 billion and made a profit of around $US400 million in its most recent quarter.