Warren Buffett inspiration for Google – Financieele Dagblad (Registration)

Google splits. The core activities separate from other activities and both entities will embrace under a holding company. Those holding company will be called Alphabet. The current executives Larry Page and Sergey Brin moved down to the holding company. The inspiration for this step is Warren Buffett, Chairman and majority shareholder of Berkshire Hathaway.

That the legendary investor is a hero in the eyes of the leaders of Page and Brin is no secret. In the letter to potential shareholders, which predates the IPO in 2004, is already referred to Buffett. And last year, in an interview in the Financial Times on the future of Google Page says: “There is no model for the kind of company that Google wishes to be. But if there is a person who has the qualities required for the tasks in the future than it is Warren Buffett. “

Larry Page

Reuters

Structure a la Buffett

Alphabet resembles his reading now to be shod. Buffett’s investment vehicle, Berkshire Hathaway has a similar structure and allocates at its discretion from the holding company capital to the underlying companies. In this structure, at least in theory, be easier to say goodbye to an activity be there more for his future elsewhere.

Google was Founded in 1998, was just another search engine. In the following years many companies were bought. For example, Google has also been operating as a telecom provider and we are working on pioneering business for the future such as self-driving cars. These activities are now put away from the search engine.

Core

The core activities will continue under the name Google. These include the search engine itself, the advertising, video channel YouTube and mobile activities. The new CEO is Sundar Pichai, who is now responsible for, among other things Android operating system and Internet browser, Chrome. Among the other activities start falling initiatives like Calico, Life Sciences and X Lab, which focuses on innovative projects. And like Berkshire Hathaway every subdivision will have its own chairman. It is not intended Alphabet himself a consumer brand will be Google’s founders say on their blog.

FD

Finally clarity

The shares will be traded under the symbol GOOG and GOOGL, only then under the name Alphabet. From the fourth quarter financial results on Google are reported separately from those of the other parts of the group. This allows investors and analysts finally get clarity where they have long been waiting for. So write analysts at Goldman Sachs in a research report released Monday that the new structure demonstrates that the company wants to increase transparency.

Now the revenues and costs of both divisions are reported separately, Goldman expects there will be more clarity on how the profitability of Google under the non-core businesses suffered. “Although it is not clear whether Google also separately shows the numbers of YouTube and mobile search activity, nevertheless we see this move as a plus. We can now determine what the profit levels and margins of the core activities.

Also, investors responded positively. The share held Tuesday largely determine the profits that were recorded in the nabeurshandel Monday.

wise decision

It is not yet known how Warren Buffett himself against the new structure of Google looks. In 2012 he left a meeting with investors still know that he is a share as Google thought too risky for his conglomerate, because he could not judge where it would go with the company. “But I certainly would not go short,” he added. And that was a wise decision by Buffett.