Google shares jump 7% following Alphabet rebranding as Wall Street welcomes transparency

Google surprised everyone by announcing a major overhaul of its corporate structure, with the creation of a new umbrella company called Alphabet under which all existing operations will now be run. While bewildering many, the announcement has been seen as a positive thing on Wall Street with shares in the company rising as much as 7% in after-hours trading as investors saw the new structure an improvement over the old.

Google, one of the world's most immediately recognisable companies, has long grown from its origins as a single website which wanted to "organise the world's information". It has become a sprawling corporate behemoth which has fingers in lots of pies including ground-breaking medial research with Calico and Life Science to autonomous vehicles and it's moonshot X Lab.

For investors it had been hard to see the wood for the trees with all of these company's listed simply as departments within Google, but as individual entities under Alphabet, their respective strengths and weaknesses will become much clearer.

"[Investors] are aware that they've got this hodgepodge of companies," said Roger Kay, an analyst at Endpoint Technologies Associates told Reuters. "Maybe it's better to sort them out a bit and make it clearer which ones are bringing in the bacon and which ones are science projects and which ones are long-term bets."

Google's co-founders Larry Page and Sergey Brin will continue to oversea their entire creation as CEO and President respectively while they have handed the reigns of Google - which will include all of the company's most important products like maps, search, Android and YouTube - to the man who has long been groomed for the role, Sundar Pichai.

Rumours

There have been a lot of rumours going around Silicon Valley in the wake of the announcement suggesting that Pichai had been tapped up for the big job at Twitter and this was a reaction by Page and Brin to get him to stay - but this is highly unlikely.

Pichai has been seen as the most important man at Google for some time and according to the date Alphabet's new website was registered (March 2014) this has been something Page and Brin have been thinking about for some time. In the letter Page penned to announce the big overhaul, he spoke warmly of Pichai as a collaborator and friend, rather than someone he was bribing into staying with a shiny new position:

"Berkshire Hathaway for the Burning Man crowd"

The new structure with a small, central core which handles finance and capital acquisition mimics that of multinational conglomerates like Warren Buffet's Berkshire Hathaway and indeed Om Malik has called Alphabet the "the Berkshire Hathaway for the Burning Man crowd" with Page and Brin betting big on the future rather than simply looking for small, short-term victories.

And while for most that is seen as a positive, there are are some offering words of caution, including Brian Wieser, an analyst for Pivotal Research Group who told Reuters: "Breaking up into two different segments - well, it's not a terrible thing. It's better than not doing it but on the other hand, you're going to have a ton of businesses buried inside of a legacy Google."

Google is now a wholly owned subsidiary of Alphabet and is by far and away its biggest business, and indeed as Wieser points out, it is itself an umbrella company for multiple, separate businesses. Nominally (and financially) search is the main operation, but consider that YouTube, maps and Android are all billion-user businesses, it is clear that Pichai has a major job on his hands to make and keep Google running as a a well-oiled machine.

It remains to be seen if Google's restructuring will work, but it appears that initially at least, investors are happy with the move.