Reports that the company formerly known as Google Google is now the next Berkshire Hathaway Berkshire Hathaway or General Electric General Electric make me cringe.
Moreover, the conglomerate structure that got its start in the 1960s was on its last leg when GE’s former CEO, Jack Welch, presided over a 20 year stretch of earnings and stock price growth — based on too-fancy financial reporting and hero worship.
Before getting into that, as I wrote August 10, Google has a new name — Alphabet. Alphabet will be a holding company and the name Google will be the home for the search, advertising, Maps, YouTube, and Android businesses that account for most of its $60 billion in revenue.
What I think of as the science projects — like Nest, Fiber, Google X, Google Ventures, the driverless car, Life Sciences, etc. — have the potential to become distinct segments in Alphabet’s financial statements.
SUN VALLEY, ID – JULY 08: Warren Buffett, chairman and chief executive officer of Berkshire Hathaway Inc., attends the Allen & Company Sun Valley Conference on July 8, 2015 in Sun Valley, Idaho. (Photo by Scott Olson/Getty Images)
To the extent that each of these get their own publicly-reported financial results, investors will be able to learn more about details like whether any of them are generating revenues or making a profit and how much capital they are consuming.
Page is excited about this new structure because he thinks it will help Google stock outperform the market — or in the lingo of finance, generate Alpha. That’s because he will be able to put strong leaders in charge, measure their performance, and decide where to invest and divest.
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Article originally posted in Forbes website.