Google (GOOGL) once again caught the Street totally by surprise with the announcement last night that the company is reorganizing into two separate entities, one to be called Google and the other to be called Alphabet.
Google will be the company's core search and advertising business spearheaded by the new CEO, Sundar Pichai. Alphabet will house all the rest of the current Google's various business units, such as YouTube, Nest, Calico and Project X.
Wall Street analysts have reacted positively to the move with price target raises and even an upgrade or two, with the core thesis being that the move by Google will create more financial transparency.
Of course, you have the analyst at Pivotal who had a Hold rating on Google shares and maintains his rating despite the move by Google to maybe open the books to an extent. He maintains the $620 price target that he had going into last night's announcement.
Just a quick question for him, then: If the idea was not to provide more financial linearity, then why bother with this entire thing in the first place? Google already was lumping all the other non-core business in the "other" line item so why go through this entire exercise? The analyst was wrong going into Google's earnings report when he had a Hold rating, maintained a Hold rating post-earnings report, and is continuing to ignore yet another positive from Google. That is his prerogative, and also his funeral as well.
All the fun and games about the name picked aside, I sense the hand of Ruth Porat, Google's new chief financial officer, behind this move. She has spent her entire career on Wall Street and knows exactly what the Street and investors want from Google going forward.
By no means will Google will be a completely open book going forward. However, with a savvy and experienced Wall Street veteran such as Porat now a part of Google management, expect a lot of Street- and investor-pleasing moves going forward.
This is the second time in her very short tenure at Google where she has brought the shares back to life in a fairly meaningful way. Ignoring her for the second time is like the old saying, "Fool me once, shame on you, fool me twice, shame on me."