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Google is taking a step towards being a conventional company, argues Dr Aleksi Aaltonen

While Google is taking a step towards being a conventional company, Dr Aleksi Aaltonen, Assistant Professor at Warwick Business School, argues that "the holding company structure raises the question would different businesses be better off as independent companies".

Dr Aaltonen's comment in full:

Larry Page and Sergey Brin like to cherish an idea that Google is not a conventional company, yet turning Google into a holding company is a step to that direction.

Google announced on Monday that it will turn itself into a holding company and organize its diverse businesses as more or less independent subsidiaries. The re-organization pleased investors who rewarded the company with a jump in share price. The new structure is expected to increase the transparency of company operations, which allows investors to excert more influence on the company direction.

Whether the re-organization will change the basic problem Google is facing is another matter. Innumerable acquisition made by the company over the years and its bold ventures to new industries have so far failed to create commercial success at the scale of its search advertising business. Google is commercially still a one-trick pony, whereas, for instance, Apple has brought iPod, iPhone and iPad to the market since Google launched its search engine.

The holding company structure may help Google to create more successful products. This can happen, for instance, if increased investor pressure imposes a healthy short-term perspective to product development or by simply allowing separate business units to operate more independently towards commercial success. At the same time, the holding company structure raises the question would different businesses be better off as independent companies. The new structure makes it easier both to sell off assets that won’t start making profit in a foreseeable future and to spin off ventures that don’t belong to the family.

11 August 2015

Contact:

Dr. Aleksi Aaltonen - Assistant Professor, Warwick Business School

Email:aleksi dot aaltonen at wbs dot ac dot uk

Website: http://aleksi.info

Tom Frew - International Press Officer

Email: a.t.frew@warwick.ac.uk

Tel: +44 (0)247 657 5910

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