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Will stock, hiring surge at a more transparent Google?

Sharon Gaudin | Aug. 12, 2015
Google's restructuring could finally deliver to Wall Street something it's been after for years: more insight into what the company is spending on things like Nest, drones and health research.

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Google's restructuring could finally deliver to Wall Street something it's been after for years: more insight into what the company is spending on things like Nest, drones and health research.

If that happens, it could boost the company's flat stock and entice the best engineers and tech workers to bypass the likes of Netflix and Facebook to sign up with the new Alphabet.

"Overall, we view the new structure as an elegant way for Google to continue to pursue long-term, life-changing initiatives, while simultaneously increasing transparency and management focus in the core business," wrote Doug Anmuth, an analyst with J.P. Morgan, in a report released Monday. "From a financial perspective, we believe the Street will soon be better able to evaluate the true performance of core Google, and may also become more accepting of Google's ongoing investment in emerging businesses such as Nest, Fiber, and driverless cars."

Late on Monday, Google announced that it is creating Alphabet Inc., a parent company that will oversee a slimmed down Google, as well as business offshoots like Nest, Life Sciences -- which includes research on a glucose-sensing contact lens -- and a startup funding operation called Capital and Ventures.

The move doesn't appear to signal any changes to some of the company's other offerings like Google search, Android or Gmail. Instead, the shift is all about the business structure.

Google co-founder Larry Page noted in a Monday blog post that with the new structure execs plan to implement segment reporting for their Q4 financial results. Google financials will be provided separately from those for the rest of Alphabet businesses.

Depending on how transparent Alphabet's segment reporting turns out to be, investors could finally get answers to the questions they've been asking.

Will the new financials show how much the company has been investing in Nest, robotics,driverless cars, its Fiber network and drones? How much is being spent? How much is coming in?

"I see Google providing a lot more visibility with this move," said Patrick Moorhead, an analyst with Moor Insights & Strategy. "By structuring the business like this, they have to provide more information. They cannot hide it.... All those businesses will need to provide more information on what they are doing and what they have done."

While Alphabet is expected to segment out its financials by its fourth-quarter earnings report, Jan Dawson, chief analyst with Jackdaw Research, noted that the company also will need to release historical financials based on the new structure so investors can put future financial information in context.

Dawson is skeptical about how financially transparent Alphabet actually will be.

 

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