Google’s move to create a holding company (Alphabet Inc.) and split its core operations from its science experiments was hailed by investors who sent the stock up almost 7% following the announcement.
We believe that this is a solid management move which will enable the company to eventually spinoff/sell ventures or partner ventures without affecting the core operations value.
From a reporting perspective, the opaqueness that prevailed in the past should now lift and allow a better and more thorough understanding of what is really going on with the company.
Under the new corporate structure, the Google unit will encompass the core search engine as well Google Maps and YouTube.
In a ﬁling with the Securities and Exchange Commission, Google said the new arrangement will take effect later this year and that it will likely result in two reportable ﬁnancial segments.
From an investment perspective, we believe that it’s a wait and see situation: it’s important to wait for the next reporting period and evaluate how much money Google (Alphabet) is allocating to pie-in-the-sky ventures. One must also evaluate how the company plans to proceed in untangling this mishmash of companies and ventures and create value for shareholders. The initial euphoria is warranted but it’s most important to see the details as they unfold in the near future. It’s interesting that Google announced this following a great quarter which saw the stock rally signiﬁcantly, therefore creating a buffer to the downside.
Alphabet/Google: Wait – patience is a virtue.
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