Every Silicon Valley techie knows that Google (GOOGL) Co-Founders Larry Page and Sergey Brin created a holding company, named "Alphabet," to oversee Google's many growing business lines (many of which don't align with Google's core operations). While some investors and tech analysts speculate that Alphabet's conception is meant to address potential (current and future) antitrust issues, such as monopolist practices, wage-fixing, and employee poaching, I actually believe this decision reflects a widespread internal restructuring project headed by new CFO Ruth Porat.
For reference, Google's stock price has appreciated by over $150 since early July, a move largely attributed to Porat's focus on cutting workforce expenditures, operating expenses, and capital costs. Google saw its stock rise nearly $100 after reporting mediocre Q2 results (in July); nevertheless, Porat's repeated emphasis on minimizing corporate inefficiencies, thereby increasing shareholder returns, resulted in bullish Wall Street praise. Furthermore, after Google announced the creation of its "Alphabet" holding company, the search giant witnessed yet another $40 price increase. Now, as of Monday's close, Google's share price sits at $694.11 and its market cap at $476 billion.
As for Google's internal restructuring, Alphabet is a brilliant managerial response to the company's undisciplined nature. Many people, including senior officials, forget Google is, at its core, a search and advertising platform (responsible for $17.7 billion, or 90%, of Google's recent Q2 revenue); however, since Google's inception, Sergey has used it as a personal R&D facility, undertaking projects like Google Glass, which are costly and irrelevant. Remember, Google is first and foremost a Software company (as evidenced by services like Chrome, Android, and Maps.). It is not a hardware company! Yet subsidiaries like YouTube (video media), Nest (IoT home devices), Boston Dynamics (robotic engineering), Life Sciences (diabetic solutions), Calico(biotech for longevity), and Google X (driverless cars and drone advancements), while extraordinary investments, actually detract from Google's main ambitions. As such, although Google has long operated in controlled turmoil, Alphabet will undoubtedly align the company's long-term business prospects, and allow Google to refocus on advertising.
As it pertains to Twitter (TWTR), Alphabet now gives executives an excuse, or reason, to acquire the once-popular social media company. Given Google's horrendous social media track record, specifically the failure of Google+, and Twitter's recent fall from grace (having lost approximately half its market cap since late April), Alphabet is well-positioned to acquire the dying blue bird. From an antitrust standpoint, Twitter would fall under the umbrella holding company, so as not to encroach upon anti-competitive practices. Furthermore, given Google's $65 billion in cash reserves, and Twitter's dire circumstances, Sergey and Larry could effectively acquire Twitter for a huge discount. While this acquisition may not occur in the near-term, it would be of no surprise if Twitter operated under the letter "T" in Alphabet's future.