Google may be Alphabet’s cash cow, but in Alphabet’s corporate structure the search and ad company is now just one of many companies operating businesses in various industries.
In a regulatory filing Friday, Alphabet described a restructuring that will put Google on equal legal and regulatory footing with its other companies. Alphabet has created a holding company called XXVI Holdings Inc. that will be the umbrella over Alphabet and all its businesses; the name refers to the 26 letters in the English alphabet. In addition, Google itself will change from a corporation to a limited liability company (LLC), which Alphabet believes better fits an affiliate company owned by a parent.
The company says the move represents the completion of a process that started when it changed its corporate structure in 2015, situating all of its businesses under the new entity Alphabet. Legally, however, businesses like the autonomous vehicle offshoot Waymo (then classified as “Other Bets”) remained subsidiaries of Google.
Until now. The restructuring could allow Google to focus on its core search and advertising business, and report results to the parent company that reflect its own results, not those of other companies beneath it. It also helps Alphabet keep potential risks in one LLC from spreading to others. While not all the legal and regulatory motivations for making today’s change are clear, it’s likely that quarterly and yearly financial reports to the SEC will still bear the Alphabet name.
But as Google drops to two levels down in the org chart, it’s unclear how much information on the company’s performance Alphabet will make public in the future. It’s already not required to report in fine detail the performance of affiliates like Google, Nest, Verily, and others to the SEC because they aren’t public companies. They’re owned by Alphabet. There’s a chance that today’s change could result in Alphabet reporting even less about its affiliates.
Alphabet says the restructuring will make its businesses more transparent than before. From today’s FCC filing:
“As a result of the corporate reorganization, Alphabet and Google will be able to operate in a more efficient, economical, and transparent manner, allowing the companies to concentrate on their revenue generating activities.”
A Google spokesperson told Bloomberg the restructuring will in no way affect shareholder control, operations, management, or personnel. Still, one has to wonder why news of Alphabet’s restructuring is hitting late on a Friday afternoon before a holiday weekend. Typically, companies pick that time to announce things they’re hoping that people won’t notice.
Read more: Last year we went deep on Alphabet’s big restructuring and what that says about its future.