Google just dropped an Alphabet-size bomb on the tech and business world -- it is reorganizing into a new company called Alphabet, with Google (and Nest, Calico and others) as its subsidiaries. Google co-founders Larry Page and Sergey Brin will lead the new conglomerate, while longtime Google exec Sundar Pichai will take over as the new CEO of Google.
The new company will have seven divisions to start: Google, Calico, Nest, Fiber, Ventures, Capital, and the X Lab. Google will remain its biggest division, but it's notable that Nest, Fiber, and the X Lab are now all separate entities. It's a hint to where Alphabet will focus its ambitions.
It's a crazy move for almost anybody... except Page and Brin. This is the kind of crazy, moonshot move that has made them into two of the wealthiest and most powerful people in the world. If you thought Google was ambitious, just wait until you see what they do next.
What can we expect from Alphabet and the next Google? While the dust is still settling, I have a few predictions about how each will evolve under the new structure.
1. Sundar Pichai will excel as CEO of Google.
There is no tech insider who will say anything bad about Pichai and his management skills. He is sharp, analytical, and capable of bringing out the best in his teams. He was always next in line to run the search giant after Page stepped down. Now he will get his chance.
Pichai has been running most of Google's core businesses and divisions for a while, including product and engineering. He has the expertise and talent to take a slimmed-down Google to greater heights. There is no question in my mind that Pichai will be a successful successor to Larry Page.
2. Expect to hear a lot more about Calico and Wing.
What are Calico and Wing? Why, they are two of Google/Alphabet's top projects. Calico is Alphabet's secretive life-extension arm, while Wing is its attempt to build a drone delivery network. Now that Google has diversified its corporate structure, you can expect the CEOs of both of these companies to receive more attention as their products come to fruition.
3. More resources are going to the X Lab.
While Google's heart and soul is its search engine, Alphabet's heart and soul is undoubtedly the X Lab, the research arm that gave birth to Glass and Calico, and will undoubtedly create some of Alphabet's biggest spinouts. Now that Page and Brin are freed up from the day-to-day management of Google, they can focus more of their time on the X Lab and launching companies to live within Alphabet's new corporate superstructure.
4. Cable and ISP companies should be scared out of their minds.
Fiber becoming its own separate company is a BIG DEAL for Alphabet. It means the new company is going to put more emphasis on expanding its cable and ISP business. Millions of people begging Google to break up the stranglehold that Comcast and Time Warner have on the Web's pipes may finally get their wish.
5. Alphabet is going to become an even bigger player in the startup investing world.
Both Google Ventures and Google Capital will become separate entities under the Alphabet brand. These two arms are a big part of Page and Brin's vision to bring world-changing ideas into the fold. Ramping up the investing effort gives them more information about key market trends and gives them the capability to acquire the winners and make them independent entities under Alphabet. I wouldn't be surprised to see Ventures and Capital's allocations jump.
6. Alphabet will be an acquisition machine.
The new Alphabet affords Page and Brin more flexibility to try long-shot ideas (like Calico), but it will also give the new corporate entity the capability to make big acquisitions that would never have made sense for Google. I predict Alphabet will be making some big-splash acquisitions this year and over the next few years. Expect a couple of billion-dollar acquisitions in the near future.
Which unicorn will join Google in the Alphabet?
If you can't tell, I am bullish on Alphabet as a concept and a company. Page and Brin never settle for what's working -- they are futurists who always want to be at the forefront of what's next. With a cleaner division of companies and ample resources, Alphabet can realize Page and Brin's wildest aspirations. It's an organization poised for tremendous growth.