What can Alphabet do that Google can't?

Google announced a new umbrella company that will oversee certain ventures in an effort to separate and reorganize Google's many operations.

Manu Fernandez/AP/File
Sundar Pichai, senior vice president of Android, Chrome, and Apps, talks during the Mobile World Congress in Barcelona, Spain, March 2. Google is creating a new company 'Alphabet' to oversee its highly lucrative Internet business and a growing flock of other ventures that are known more for their ambition than for turning an immediate profit. Google CEO and co-founder Larry Page will be CEO of the new holding company, while longtime Google executive Sundar Pichai will become CEO of Google's core business, including its search engine, online advertising operation and YouTube video service.

Google’s Internet business and innovation ventures are getting so big, executives have decided a new company is needed to oversee them.

Google co-founder Larry Page announced Monday the creation of holding company Alphabet, which will oversee Google’s ventures and operations outside of its core Internet services. By separating Google’s basic services – its search engine, advertising, and YouTube video platform – from its more complex ones – like Google X, the research lab that produced the Internet headset Glass and is conducting Google’s self-driving car project – Google may improve fiscal accountability.

"Our company is operating well today, but we think we can make it cleaner and more accountable," Mr. Page wrote. "We believe this allows us more management scale, as we can run things independently that aren't very related."

Page will become Alphabet’s chief executive officer, and Google co-founder Sergey Brin will join him as president. Google’s core business will be left in the hands of longtime executive Sundar Pichai, whom many have expected to succeed Page. Chief financial officer Ruth Porat will continue to act in her current capacity for both Google and Alphabet.

In addition to Google X, Alphabet will oversee independent operations by health research firm Calico, home appliance developer Nest, broadband provider Fiber, and corporate investment entities Google Ventures and Google Capital.

Google reported more than $14 billion in profit last year, but not all its operations are equally lucrative. Online advertising has brought in the largest profit – in 2014, Google dominated the online advertising industry, controlling 40 percent of the market – while larger-scale ventures have yet to show returns.

Analysts said the company’s reorganization with the addition of Alphabet could not only make financial reporting clearer, but may also make it easier for Google to buy and sell individual businesses.

Both of Google’s two classes of stock climbed in value by more than 6 percent Monday afternoon following Page’s announcement.

This report contains material from the Associated Press.

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