Google Inc. (GOOG, GOOGL) has officially changed its name to Alphabet. Especially in light of the 2014 Google stock split, investors in GOOG stock may be wondering what exactly is going on with the corporate structure of this tech giant and what it means to them.
The short answer: Not much.
It’s basically a name change, with Alphabet as the parent company. Other divisions, which were always part of the broader corporate parent, will remain individual subsidiaries. The only real difference is that one of those subsidiaries — the advertising powerhouse that is driven by search and AdSense sales — will take the Google name and run with it. After all, Google is synonymous with search advertising… but not so much with the glucose-sensing contact lenses being developed by Calico Labs.
Get it? If not, here are the highlights:
- Alphabet is group of companies, many of which were acquired or developed internally by what used to be Google Labs.
- The biggest part of Alphabet stock that investors need to watch is the now-focused subsidiary of Google internet businesses. All those advertising dollars that drove GOOG stock before will still do so, and they will come from this unit.
- Both GOOG stock and GOOGL stock will continue to trade separately, and at the same previous prices. They are ownership stakes in the parent company, Alphabet.
- GOOG stock will represent Class C shares of Alphabet, but with no voting rights, while GOOGL stock represents Class A shares with one vote each.
Google founders — I suppose they can also be called Alphabet’s founders — Sergey Brin and Larry Page have talked at length about this change in a corporate blog post, stating, “This newer Google is a bit slimmed down, with the companies that are pretty far afield of our main Internet products contained in Alphabet instead.”
But for the typical GOOG stock investor, a lot of the posturing about reporting structure and focusing corporate efforts should be old news.
After all, Google Labs was wound down in 2011 as the company pledged to put “more wood behind fewer arrows” and stop chasing money-losing boondoggles it found cute and interesting. By calling the core internet advertising biz Google and making an umbrella company Alphabet, the corporate parent is simply aligning the financials of GOOG stock and the perceptions of consumers with the actual structure of the company.
The big challenges ahead for GOOG and GOOGL stock — whether it’s called Alphabet or anything else — continue to be issues of mobile advertising rates and high hopes for continued growth in video on its flagship YouTube property.
A name change doesn’t do much to that mission, or the metrics that matter to investors.
Jeff Reeves is the editor of InvestorPlace.com and the author of The Frugal Investor’s Guide to Finding Great Stocks. As of this writing, he did not hold a position in any of the aforementioned securities. Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP.
