Case:

Alphabet Inc.: Reorganizing Google

In October 2015, in an unexpected move, global technology giant Google Inc (Google) restructured itself as Alphabet Inc (Alphabet), a new holding company under which Google's non-core businesses, including self-driving cars, life sciences research, high-speed Internet access, and investment divisions, were spun off as distinct entities and separated from the company's Internet operations such as Android, YouTube, and the Google search engine. The businesses were reorganized into two reporting segments: 'Google' and 'Other Bets'. This marked a massive shift from the earlier setup in which Google was in charge of a number of diverse companies, some of which carried it far afield from its core search business. Under the new structure, a number of businesses including Google operated as subsidiaries of Alphabet and were run independently, each with its own CEO. According to a statement posted by Larry Page co-founder of Google, on the company's official blog, "Fundamentally, we believe this allows us more management scale, as we can run things independently that aren't very related. Alphabet is about businesses prospering through strong leaders and independence [. . .]. This new structure will allow us to keep tremendous focus on the extraordinary opportunities we have inside of Google." Co-founded by Page and Sergey Brin in 1998, Google provided Internet-related services and products including web-based search, cloud computing, software applications, online advertising technologies, mobile operating systems, consumer content, enterprise solutions, and hardware products. Since its inception it had focused on innovation and come out with disruptive technologies from time to time. The company had branched out into hosting services like video and mapping, enterprise services, e-mail and chat, social networking space, payment gateway services, mobile operating software, and wireless device sales. Google's technological innovations made it one of the most recognized and valuable brands in the world. However, over a period of time investors had begun to voice strong concern over Google expanding into areas unrelated to its core search business and into unknown territory in terms of profitability. They felt that Google had got distracted from its core web search and was hemorrhaging money in pursuing projects fancied by its founders such as developing robots and self-driving cars and studying life sciences. Investors began to question the heavy investments the company had been making in non-core businesses and the lack of clarity concerning risky investments. Analysts too found it difficult to evaluate the company's broad set of businesses and figure out their individual performances. Eventually, the senior management realized that the company had become too complex to manage and that a change was required to allow for cleaner operations and more accountability. Subsequently, they announced a radical shake-up of Google's corporate structure and management, and created a new holding company called Alphabet that would manage a collection of companies, the largest of these being Google. Industry observers saw this move as being a response to Google's stagnant share price and an attempt to pacify investors. Some analysts lauded the move saying Google's decision to restructure itself under a new holding company would protect its core brand Google, increase the operational independence of the individual businesses, and usher in greater financial transparency across divisions. On the other hand, some analysts criticized the change and questioned how the restructuring would make the company's businesses competitively stronger and increase profitability and company valuation. Post restructuring, Alphabet pushed for more financial discipline and accountability from its riskiest ventures. The non-core companies were struggling as they faced unprecedented pressure to bring their costs in line with their revenue. In fiscal 2016, 'Other Bets' posted a loss of about $3.6 billion. Moreover, some key executives who were chosen to turn the riskier 'Other Bets' into reality departed from Alphabet, allegedly over pressure to perform. Going forward, investors would likely pile up the pressure if the company faltered and nothing profitable emerged from 'Other Bets', said analysts. The questions being asked were: Will the creation of Alphabet spell a new successful era for Google? Can Alphabet maintain Google's lead as an innovator and challenge competitors in a wide array of industries? Background Note Google's roots lay in a research project on search engines taken up by two PhD students at Stanford University, Larry Page and Sergey Brin, in 1996. Google pioneered a new technology called 'PageRank', which determined the importance of the website by the number of other pages linked to it and their importance that linked back to the original site. This new technology marked a shift from the earlier method followed by other search engines which ranked the results by the number of times the search terms appeared on the page. The search engine was initially called 'BackRub' as it determined a web-site's relevance by checking its back links. The name was finally changed to Google, based on the word 'Googol'the number one followed by a hundred zeroes. Google's primary domain 'www.google.com' was registered in September 1997 and the company was incorporated in September 1998 in a friend's garage in California, USA. In 1999, Google moved its headquarters to Palo Alto, California, home to several other technology companies. Google's mission was "to organize the world's information and make it universally accessible and useful."In August 2001, Eric E. Schmidt succeeded Page as the CEO of Google, just five months after joining the company as chairman of the board. Google started to sell advertisements associated with search keywords. This advertising model was success-ful and the company started getting a major part of its revenues from search-related advertising. From 2001, Google based its growth strategies on acquiring many small companies with innovative products. It added many other products to its product portfolio like Google Eartha and YouTubeb in this way. Apart from acquiring other companies, Google also launched its own products like the free webmail, called 'Gmail', in April 2004. Gmail was also well received by the web community due to the massive increase in storage space provided by Google (initially one GB). The success of Gmail and YouTube made Google the undisputed leader on the Internet, with the company overtaking many other established Internet companies like Yahoo! Inc. Google's promoters were hesitant to go in for an Initial Public Offering (IPO) as they were apprehensive that public scrutiny and financial regulations would make the company less agile.4 But, due to the demands of venture capitalists who wanted to cash out, Google filed for an IPO in April 2004. In the IPO prospectus, Google's founders attached a letter subtly warning potential subscribers that Google was not a conventional company and did not aim to be one.5 The dual class equity structure proposed by Google's founders proved controversial. Google's IPO comprised only the issue of Class A shares, each of which was entitled to a single vote. Google's founders, venture capitalists, and other insiders held Class B shares which were entitled to 10 votes per share. Class C shares had no voting rights, except as required by applicable law. Critics lambasted this share structure as they felt that it gave the founders significant management control and could lead to potential management abuse. But Page and Brin defended the structure on the grounds that it would help them fulfill their long-term vision for the company without getting bogged down by short-term financial demands.7 By the mid-2000s, Google faced a new challenge in the form of the ever-expanding high-end mobile phones dubbed as smartphones. Developing applications for the variety of platforms on which these smartphones were available proved to be cumbersome for Google. The company therefore decided to launch its own open-source platform for mobile phones, which would give application developers the freedom to develop applications for various mobile phones without depending on any handset manufacturer or service provider. Hence, Google acquired an open-source mobile platform called Android from Android, Inc. and released its first version in the market in 2009. Android proved to be an instant hit in the market and soon emerged as the dominant mobile operating system in the world. In April 2009, Google launched a venture capi-tal arm called Google Ventures to invest in a diverse array of industries, including the consumer Internet, software, clean tech, and healthcare. In January 2011, Schmidt stepped down as CEO of Google and Page took over. Schmidt continued as Executive Chairman of the company. In August 2011, Google acquired Motorola Mobility LLCd for $12.5 billion in order to make its own hardware for smartphones, tablets, and other devices. Other than acquiring other smaller companies for launching new products, Google also focused on innovation and spent huge sums of money on developing new services. However, rather than a simple iterative approach to innovation, Page wanted Google to develop a 'moonshot mentality' where it would be inspired to create products and services that were 10 times better than the competition. Google X, a separate division which was established in early 2010 to come out with 'moonshot' projects, was Page's brainchild. In 2010, Google started to invest heavily in developing technologies which were both related and unrelated to its core business. Most of these products were innovative and were totally new to the world. One of the most hyped up technologies developed by Google was 'Google Glass', a wearable computer which came with its own optical head-mounted display (OHMD). This wearable computer performed many of Another important the tasks traditionally performed by other portable gad-gets like smartphones and tablets. technology that Google had been working on was the Google Driverless Car project. This project was aimed at developing autonomous cars which would drive on their own without the need for any physical drivers. Google was testing cars which ran using this technology across the world and was expected to release it for the mass market once it obtained the legal clearances. In September 2013, Google entered into healthcare research by creating a new company called Calico to make advancements in human health and well-being, in particular understanding the aging process and increasing the longevity of people. There were two other innovative technology projects of Google aimed at improving accessibility to people around the world. The more ambitious of the two was Project Loon which aimed to bring Internet access within the reach of people living in remote parts of the world. Another new service that Google was experimenting with was Google Fiber which promised to bring very high-speed Internet access (100 times greater than the prevalent broadband speeds) within the reach of everyone. In order to make its mark in smart-home systems, in January 2014, Google acquired Nest Labs, Inc., a smart-home appliances maker of thermostats and smoke alarms, for $3.2 billion. Less than three years after acquiring Motorola, Google sold the smartphone maker to Chinese PC manufacturer Lenovo for $2.9 billion in January 2014. In June 2015, Google started an urban innovation company called Sidewalk Labs that used technology and innovation to improve urban life. Google's revenues for the year 2015 were $74.5 billion with over 90% of the earnings coming from online advertising. The company had more than 59,976 employees worldwide as of October 2015. Why Google Became Alphabet Since its inception, Page and Brin had massively diversified Google from its origins as an Internet search engine to invest in several projects that were unrelated to its core business such as self-driving cars, renewable energy, wearable technology, artificial intelligence, mapping services, and the Android operating system. According to them, Google being just a search company, no matter how successful, would not be able to consolidate its position in the highly competitive tech market without diversifying. The duo began to pour money into far-off fields by increasing their spending on research and development. In the 2004 Founders' IPO Letter, they wrote," Google is not a conventional company. We do not intend to become one. Do not be surprised if we place smaller bets in areas that seem very speculative or even strange when compared to our current businesses. Although we cannot quantify the specific level of risk we will undertake, as the ratio of reward to risk increases, we will accept projects further outside our current businesses, especially when the initial investment is small relative to the level of investment in our current businesses." Though Google's diversification strategy drove the company forward and benefited customers, it created several issues. Google was tight-lipped about its riskier and non-core investments, including the moonshot projects, which left investors feeling uneasy. "Historically, Google has notoriously been a black box. Larry Page and company consistently marched to the beat of their own drum,"11 said James Cakmak, an analyst at equity research and trading company Monness Crespi Hardt & Co. Moreover, the financial returns of the search engine and advertising business were not observed separately from the investments in all of the new businesses. This appeared to limit transparency, accountability, and discipline across the company. The moonshot projects lost $1.9 billion in 2014.12 Google came under some pressure from Wall Street as investors began to question the heavy investments it was making in non-core businesses and complained about the lack of clarity regarding risky investments. The shareholders were upset as there were no paybacks to them in the form of dividends or buybacks. Profits from the search and ad business were plowed into vague innovation projects leaving investors worried and this led to stagnation in Google's stock price despite the company's long-term value creation. Observers felt that Google had become a vast and diverse company and its mission statement"to organize the world's information and make it universally accessible and useful"no longer made sense. According to Michael Quirke, senior consultant at brand agency Brand Union, "Their ambitions in health, hardware and drones are too far from their search core to keep under the Google name, and that name was beginning to get tarnished for its world-eating ambitions." As Google continued to grow at a rapid pace, problems began to emerge in its organizational structure. Prior to restructuring, Google had adopted a cross-functional organizational structure which was more of a team approach to management and was structured horizontally wherein Google, the parent company, was in charge of a number of diverse companies (See Exhibit 1). Google implemented a centralized decision-making system wherein Brin and Page along with Schmidt made all the major decisions together. Though the system made sense in the beginning, it turned problematic as Google grew in size. On many occasions, the trio used to discuss and debate for long hours, making the product teams wait and stalling all the dependent processes. Sometimes these meetings would end with Google Inc. IP no tangible decision being arrived at because one of the three was missing, making one more discussion inevitable. This slowed down the decision-making process at the company. Some analysts also criticized Google for maintaining an opaque and monolithic structure, where no outsider would know the developments behind the scenes. Analysts themselves found it difficult to evaluate the broad set of businesses and to figure out the performance of the core business. As managing such a diverse set of business operations under a single organization was creating bottlenecks, experts felt that the company was in need of a strong and accountable management structure and strategy. Eventually the senior management at Google realized that the company had become too complex to manage as it was pursuing potentially big new businesses in industries far from its search-engine roots. They wanted to improve the transparency and provide an oversight of what the company was doing. Page admitted that Google's original mission statement had become somewhat obsolete. "We're in a bit of uncharted territory. We're trying to figure it out. How do we use all these resources . . . and have a much more positive impact on the world," he said. In August 2015, Page announced a plan to draw a dividing line between Google and its other ventures by creating a new public holding company under which Google's non-core businesses would be spun off as distinct entities and separated from the company's main Internet-related businesses. He said, "We've long believed that over time companies tend to get comfortable doing the same thing, just making incremental changes. But in the technology industry, where revolutionary ideas drive the next big growth areas, you need to be a bit uncomfortable to stay relevant. Our company is operating well today, but we think we can make it cleaner and more accountable. So we are creating a new company, called Alphabet On October 2, 2015, Alphabet became the parent holding company of Google and its diverse set of businesses with no business operations of its own. The restructuring was carried out under a Delaware General Corporation Law called Section 251(g), according to which a company incorporated in the state could produce and merge with a holding company without the consent of shareholders. Under Section 251(g) DGCL, Google incorporated Alphabet Holding as its whollyowned subsidiary and, in turn, caused Alphabet to merge with Maple Technologies (a Merger Sub), to form a Google Merger Sub. Following the Alphabet Merger, Google Merger Sub, an indirect, wholly-owned subsidiary of Google, merged with and into Google. Upon consummation of the reorganization, Google became a direct, wholly owned subsidiary of Alphabet and the transitory existence of Google Merger Sub was disregarded . Thereafter, Google Forms Alphabet as its wholly owned subsidiary New Alphabet Holding Co (Delware) Merger of Merger Sub with and into Google Inc. Forms Merger Sub as its wholly owned subsidiary Google Merger Sub (Maple Technologies, Inc., Delaware Corporation) shareholders transferred their stocks to Alphabet in exchange for New Alphabet stock. Experts said that Google's molding into Alphabet was uniquely possible because of the company's rare stock-holding structure, where its founders controlled the direction of the business without majority economic ownership of the company's stock. Since Google share-holders had few voting rights, they were unable to block the transaction by filing a lawsuit in the Delaware Court of Chancery. Under the new structure, a number of companies, including Google, operated as subsidiaries of Alphabet. Alphabet's only significant assets were the outstanding equity interests in Google and other future subsidiaries of Alphabet (See Exhibit 3). The businesses were reorganized into two reporting segments: 'Google' and 'Other Bets'. Google's mature businesses and main Internet prod-ucts such as Search, Ads, Commerce, Maps, YouTube, Apps, Cloud, Android, Chrome, Google Play, as well as hardware products such as Chromecast, Chromebooks, and Nexus and technical infrastructure and efforts like Virtual Reality remained under Google. What got separated were companies that were far afield of the core search products. These formed 'Other Bets' and included Access/Google Fiber, Calico, Nest, Verily (formerly Google Life Sciences), Google Ventures, Google Capital, X (formerly Google [X]), and other initiatives. Addressing a group of shareholders, Page said that Google's new structure was inspired by and modelled after Berkshire Hathaway,g which owned many diverse and independent businesses with strong CEOs in place for each of its operating entities. Where Alphabet was concerned, the CEOs of each subsidiary would report to Page who had become the CEO of the holding company. Brin was appointed as its president. Meanwhile, the Vice President of products at Google, Sundar Pichai, replaced Page as the CEO of Google, the largest subsidiary within the Alphabet umbrella. Schmidt and David Drummond transitioned from being the Executive Chairman and Chief Counsel respectively at Google, to functioning in the same capacities at Alphabet. Ruth Porat was appointed as the CFO of both Google and Alphabet and was responsible for overseeing the reorganization of Google into Alphabet. Omid Kordistani stepped down as Chief Business Officer of Google and become an adviser to Alphabet and Google. Corporate governance remained largely unchanged as Google's board became the Alphabet board. Alphabet remained incorporated in Delaware and its corporate website was named www.abc.xyz. As part of the identity shift, Alphabet posted a new code of conduct for its employees and replaced Google's famous "Don't Be Evil" motto with "Do the right thing" (See Exhibit 5). Talking about the new organization, Page said, "For Sergey and me this is a very exciting new chapter in the life of Googlethe birth of Alphabet. 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! We also like that it means alphabet (Alpha is investment return above benchmark), which we strive for! I should add that we are not intending for this to be a big consumer brand with related productsthe whole point is that Alphabet companies should have independence and develop their own brands. Exhibit 5 Alphabet Inc-Code of Conduct for Employees I. Avoid Conflicts of Interest A conflict of interest may arise any time competing loyalties could cause you to pursue a personal benefit for you, your friends, or your family at the expense of Alphabet or our customers. Avoid conflicts of interest and circumstances that reasonably appear to be a conflict. Sometimes a situation that previously didn't present a conflict of interest may develop into one. When faced with a potential conflict, ask yourself: Would this activity produce an actual or apparent incentive for me to benefit myself, my friends, or my family? Would this activity harm my reputation or hurt my ability to performmy job? Would this activity embarrass Alphabet or me if it showed up in the press? If the answer to any of these questions is "yes," the relationship or situation is likely to constitute a conflict of interest, and you should avoid it. II. Ensure Financial Integrity and Responsibility Ensure that money is appropriately spent, our financial records are accurate, and our internal controls are honored. If your job involves the financial recording of our transactions, make sure that you're familiar with all relevant policies, including those relating to revenue recognition. Never interfere with the auditing of financial records. Similarly, never falsify any company record or account. If you suspect or observe any irregularities relating to financial integrity or fiscal responsibility, no matter how small, immediately report them. III. Obey the Law Comply with all applicable legal requirements and understand the major laws and regulations that apply to your work. Alphabet retained Google's multi-class share structure. As part of the reorganization, Alphabet replaced Google as the publicly traded entity and all shares of Google automatically got converted into the same number of shares of Alphabet with the same designations, rights, powers, and limitations as the corresponding share of Google stock. The company's two classes of shares continued to trade on Nasdaq as GOOGL and GOOG. After the restructuring was announced, shares of the class A common stock of the company climbed 6%, thereby adding more than $28 billion to the company's market valuation. According to Erich Joachimsthaler, founder and CEO of Vivaldi Partners Group, "This corporate structure will work. It is a rather painless exercise relative to the alternativemergers and integration. Integrating large, existing businesses into Google is timeconsuming, unattractive and costly. The Alphabet structure simplifies. Simplicity wins!" A Good Move? According to some analysts, the new structure was a smart way for Google to pursue long-term growth while simultaneously increasing transparency and management focus on the core business. According to Eric Bradlow, co-director of the Wharton Customer Analytics Initiative, "On net, [the restructuring] is probably a good move for branding, positioning, P&L [profit and loss reporting] and also for Sundar Pichai. It allows Google to have many uncertain, but high potential, ventures without damaging the parent brand. It also allows them the opportunity to keep the P&L separate for different areas of the company." More Focus The move would ensure clearer oversight of the company's ambitious and risky research projects and allow greater focus and control of unrelated companies like Calico, X, Google Capital, Nest Labs etc., said analysts. Jeff Kagan, an independent industry analyst, said, "This is what they should have done years ago. They've gotten out of control . . . As Google gets bigger with all of these different businesses, they get sluggish. They've gotten too big with too many arms and they're going in too many directions. This should deal with that." While Alphabet would give the company's moonshot bets new opportunities to grow, it would also segment them as distinct subsidiaries, each with its own liability, management, and profit stream. The subsidiaries would be freed from the matrix management of a large company such as Google. Each entity within Alphabet could be assessed on its own merits and flourish without the distraction of the potential impact on the core business. For instance, Google would not have the burden of the potential liability for X Labs and could focus on its core services like advertising and YouTube which had been money spinners for the company. Innovation at Alphabet would also get a boost as founders Page and Brin stepped back from the day-to-day operations of Google and focused on the immense opportunities inside of Alphabet. They could dedicate their time to developing smaller emerging business lines, launching path-breaking products that might result in windfall gains for Alphabet shareholders and keep them happy. Eventually, these founders felt that becoming Alphabet could help them stay in control of the larger vision for the company and experiment and grow into areas that might be seen as unlikely for Google Under the new structure, Google could give operating divisions more leeway to make their own decisions and keep the businesses more nimble. Subsidiaries would get their own legal departments and be able to set their own benefit structures and culture to some extent. With each division headed by its own CEO, leaders would be able make independent decisions and drive the company forward. Stepan Khzrtian, co-founder and Managing Partner of international business law firm LegalLab Law Boutique, said, "Putting its many projects into separate companies and donning each with a strong CEO, Alphabet can be seen as sparking robust competition and entrepreneurial spirit among its many arms. Although not necessarily direct competitors, these different projects (or different companies, I should say) will be fighting hard to bring their red financials into the black, become profitable, and remain favorable in the eyes of the senior management at Alphabet . . . or risk being scrapped as a failed enterprise." The moonshot projects would no longer have to justify themselves as adding value to Google's core search business as they would be standalone operations, to rise or fall on their own, opined analysts. They had to support themselves in the market rather than be falsely buoyed by the Google brand name. Rik Moore, head of creative strategy at Havas Media, said, "It allows the best of both worldsto both protect Google from association with any future false starts, while giving new projects breathing space to find their own identity away from the Google mega-brand. Limiting Liability The restructuring would limit liability. Alphabet as a holding company would not be liable for the debts of its subsidiaries, while the subsidiaries would not be liable for each other's debts. Moreover, the creation of subsidiaries implied that potential legal fallouts or the failure of any risky bet would not impact the rest of the holding. Prior to restructuring, if one of the new projects failed, Google had to bear the loss but with its new structure, Alphabet would shield itself from the liability of its risky moon-shots, said analysts. "With its new structure, Alphabet is insulating its vague and risky businesses (Calico, Sidewalk, Fiber, Google X) from the tried and true ones (Search, Ads, Apps, Android, YouTube, Maps). So, if one or more of these 'bets' fails (big?), it would be sinking its own boat rather than bringing down the entire ship,"Moreover, having several subsidiaries might yield more tax advantages than having one large company with combined profit and losses, felt some analysts. Corporate Transparency. According to analysts, greater transparency of both cash flows and investments would prompt greater discipline and accountability across the company, allow better analysis and valuation of the individual businesses, and increase shareholder value. Investors would be better able to value Alphabet's individual companies based solely on their financial performance. There would also be more disclosure around operations of the company's main search business, including YouTube, mobile search, and online advertising, which Google had not disclosed earlier. Analysts said the new structure would improve corporate transparency, providing investors with a clear oversight of the company's businesses, thereby fueling better decisions and increasing the stock price of the company. Averting Anti-trust Regulation. Over the years, Google as a single entity, had been the target of antitrust legislation in the US and Europe. European regulators were hostile toward Google and viewed its growing foot-print and Internet monopoly as a threat to their local business interests. The company had faced inquiries from a number of different governments regarding its business practices, data collection methods, and privacy policies. In fact, the European Commission had accused Google of engaging in anti-competitive practices by privileging its own products and services over those of competitors in its search engine. Analysts felt that by spinning off its arms, Google might be able to pre-empt anti-trust regulation and placate regulators who were worried about Google becoming too powerful as a single entity. Moreover, for some years, Google had been criticized for its approach to tax, data protection, and international secrecy. Experts said the shift from a single 'Branded House' approach toward a pure 'House of Brands' architecture would make Alphabet less vulnerable to scandals. "By creating a house of brands and the Alphabet holding company they distance corporate risk from brand equity and reduce any potential impact of corporate misdeeds on its consumer brands," observed columnist Mark Ritson. Talent Retention and Employee Acquisition. According to some analysts, the reorganization would allow entrepreneurship within the company to flourish, promote good talent, and prevent talent loss. More talented senior executives, who otherwise might get poached by other powerful competitors, would be promoted within the company. Reportedly social networking service Twitter Inc. had been pursuing Pichai as its future CEO around the time the reorganization was announced. "You have a number of long time people who've been at Google, and eventually they want to run their own things, run their own shows. It's hard when top management is locked in and you can't really change it," said Danny Sullivan, an industry expert on search engines. By creating a portfolio of separate businesses, Alphabet would also open up many more high ranking executive openings. There would be more opportunities to hire responsible managers with in-depth knowledge in certain areas for the individual companies in the holding. The move would also allow Alphabet to employ different leadership styles and develop different cultural variations for each of its businesses. Google had created a highly distinctive culture such as its popular HR pol-icy called 'Innovation Time Off' I and its campus-based community approach. The new Alphabet would allow each subsidiary to alter the company's unique culture according to the needs of each business. For instance, visionaries, risk-takers, and engineering whiz kids might better fit in with moonshot companies while disciplined go-getters would do better in its more mature businesses. Paving Way for More Acquisitions. Industry observers felt that Google's acquisitions over a period of time had been overshadowed by doubts on how these new aspects of the business would fit in with the pre-existing facets of the business. Although some acquisitions such as YouTube were successful, many acquisitions had been either wholly swallowed up like Keyhole Inc. or simply shut down as in the case of Dodgeball. Analysts said the new holding company structure would make it easier to bring in new acquisitions, since the new businesses could be added without having to be bundled together with Google's core business. The opportunity to gain access to Google's talent pool, corporate relationships, and high level of independence that could not easily be offered by Google's former management structure would produce an unparalleled value proposition for future acquisitions targets, they added. "What Silicon Valley values is innovation and scale, which is what acquisitions can help heighten. This concept is some-thing that Google perhaps could not offer other companies. In order for Google to increase its chances of purchasing a multi-billion-dollar company, it must promoteat the forefront of their agendathat a company along with its employees could exist under Google without losing sight of its uniqueness. The Alphabet structure could make this easier to implement, with its guarantee of generally neutral fiefdoms," wrote author Katie Wong. Criticism Some analysts were, however, skeptical about the level of clarity the reorganization would actually bring as it was not clear how much of its quarterly financial information Alphabet was willing to share. They felt that the financial details disclosed by the new company were more or less similar to the ones discussed in Google's earlier earnings reports with only the labels being changed and other minor details added. Alice Truong, deputy growth editor at Quartz, Asia, commented, "On balance the news is positive as this provides for incremental transparency into Google's business and suggests the company is looking for ways to balance founder and employee interests with those of investors. It may be overly optimistic at this point to hope for discrete business unit breakouts for the display network business GDN, YouTube, other Doubleclick-related activities, Google Play, Android, etc. Further, it remains to be seen whether or not key cash flow items such as capital expenditureswhich are not commonly broken out by companies with multiple reporting segments, but which are particularly critical for Googlewill be disclosed at the segment level. According to some critics, the name 'Alphabet' was neither innovative nor catchy and it made it look as if the company was starting from scratch. They wondered why the new holding company had defected from the extremely valuable core name, Google. The spinoff businesses could have benefited from the powerful brand name, they added. Jim Prior, CEO of international brand consulting agencies The Partners and Lambie-Nairn, said, "As a Brand Consultant I do understand how that familiarisation process worksI just think it could have, should have, been something better and cooler than the overly simplistic Alphabet. What this name fails to convey to me is any sense of the specialness of the corporation, nor its ambition, long-term view, empowerment, scale, transparency, focus or humanitywhich are the things Larry writes in his memo that they are excited about." Some analysts felt it was not yet clear how the reor-ganization would increase the profitability and valuation of Google. They said other than the name change, there was not much happening differently. Experts opined that the restructuring had not led to a compelling tangible corporate strategy for the overall enterprise. Moreover, according to them, the reorganization failed to address how Alphabet's businesses would become economically stronger and its projects more likely to succeed as they operated under a holding company. "Yes, the company's new structure is now clearer to the outside world, but its strategy remains as opaque as ever. As long as that's the case, Alphabet is just a new dog trying an old trick to appease the outside world and cope with internal complexity, remarked Ken Favaro, a Forbes contributor.

Please read the given case and answer the following questions analytically in detail with examples.

Questions:

1.The effect of the event that happened in 2015 on Google's stock prices; please explain this by preparing a table that shows historical data.

2.Was this move due to Google's stagnant share price and an attempt to pacify investors?

3.Analyze the effect of Google's decision to restructure itself under a new holding after 2015.

4.Evaluate whether the expansion of Google Inc. into non-core businesses, including self-driving cars, life sciences research, high-speed Internet access, and investment divisions was a good move for Google.Please provide historical data to prove your points.

5.Describe how the restructuring has made the company's competitiveness stronger in the market and increased profitability and company valuation?

6.Finally, if you conclude that this move was beneficial for Google, explain the economic ground for this profitability:

a. Diversification,

b. Higher market share,

c. Economies of scale, or

d. Something else