The move to break apart Google into a holding company structure via Alphabet is seen as a good step toward boosting transparency and properly valuing the various experiments by Larry Page and Sergey Brin with the potential to become the Berkshire Hathaway of technology.
At least that outcome is what analysts are rooting for.
On Monday, Google announced plans to become a subsidiary of Alphabet, a holding company to be led by Larry Page. Sergey Brin will be president of Alphabet. Google gets focus and Sundar Pichai as CEO. And the various experiments---Google Fiber, self-driving cars, drone delivery etc.---will be separated and potentially become businesses.
The initial reaction from analysts was positive, but many observers noted that it remains to be seen how transparent Alphabet really becomes. Here's a recap of the comments on Tuesday.
Wells Fargo analyst Peter Stabler:
Though a positive, we believe questions will quickly pivot toward whether with this move "core Google" will elect to provide further operating metrics. In particular, we have seen rising interest in metrics that could help investors better understand the impact of mobile search, the growth rate of YouTube, and relative contribution of other Google display advertising products such as the DoubleClick Ad Tech stack. In short, this move will help answer key investor questions regarding high level investment strategy, but as of now doesn't provide any clues whether further operating metrics for core Google will be forthcoming. We also expect investors to question whether break-out of core Google assets could signal a more aggressive approach to expense management.
Stifel analyst Scott Devitt:
Larry Page and Sergey Brin meet Warren Buffett and Charlie Munger as the Berkshire Hathaway of the Internet emerges for a multi-year stock run, in our view...The company has recently been giving investors exactly what they've wanted, with the strong management team exercising disciplined focus on value creation, and with multiple business units operating with reasonable levels of autonomy.
JMP Securities analyst Ronald Josey:
As a result of this change in operating structure, Alphabet will begin reporting segment results in 4Q, which we believe will demonstrate the health and profitability of Google's core Search, Ads, and Internet businesses that was often clouded given investments in non-Core operating assets, such as Google's Self-Driving Cars, Project Wing, and other non-direct Internet businesses, including Google's health efforts (Calico and Life Sciences). It remains unclear how granular the new reporting structure will be, although we expect the company to at least report revenue and profitability per major operating unit, thereby providing increased transparency overall.
Cowen analyst John Blackledge:
With the Alphabet's move, Google ushers into the spotlight a new cadre of leaders (like Pichai) who will have autonomy over the internet business. For Page - Brin, it allows them to focus on longer-term, start-up oriented, and higher growth.