Alphabet has consolidated all its businesses except for the Google division into a new business unit called "OtherBets," which now reports financial results separately. While divisions like Nest, Google Fiber, and Google X have been struggling financially, Alphabet’s core businesses—Google Search, Android, and YouTube—continue to perform strongly.
Apple, once the world's most valuable company by market capitalization, saw its position challenged after Alphabet released its first earnings report under its new structure. Google's stock price surged, briefly surpassing Apple and becoming the most valuable tech company. As of the latest after-hours trading, Google's market value is approaching $565 billion, outpacing Apple's $539 billion.
Just a year ago, Apple's market cap had soared past $700 billion, nearly double that of Google at the time. What has changed in such a short period? A major factor was Alphabet’s restructuring, which included the launch of its holding company. On August 11, 2015, Google co-founders Larry Page and Sergey Brin announced the creation of Alphabet, with Brin serving as CEO and Page as chairman. This move restructured Google’s operations, shifting non-core projects into separate subsidiaries under the Alphabet umbrella.
The restructuring also meant that Google would focus on its core businesses while other experimental ventures, like Life Sciences and Calico, became independent entities. In the latest earnings report, Alphabet highlighted the performance of its "OtherBets" segment, which includes these high-risk, long-term projects. Despite losses from ventures like Nest and Google Fiber, the core Google business continued to grow, with revenue rising by 18% year-over-year to $21.3 billion.
For the full fiscal year 2015, Google reported total revenue of $74.5 billion, up from $56.7 billion in 2014. Meanwhile, the "OtherBets" segment faced significant losses, with an operating loss of $3.6 billion in FY15, compared to $1.9 billion in the previous year. These losses were partly due to investments in ambitious but unproven projects.
Meanwhile, Apple has struggled with declining growth. Its recent quarterly report showed a minimal increase in iPhone sales, the lowest since the product's launch in 2007. CEO Tim Cook admitted that Apple might face its first-ever sales decline, raising concerns about the company’s ability to innovate. Analysts suggest that while Apple remains profitable, it's facing challenges in maintaining the same level of innovation that once defined it.
In contrast, Alphabet's strong financial performance and strategic restructuring have reassured investors. The company is not only focusing on its core strengths but also investing in futuristic projects without sacrificing short-term stability. Some analysts believe that Alphabet’s stock surge reflects improved cost control, better financial discipline, and a renewed focus on shareholder returns through stock buybacks.
As the tech landscape continues to evolve, both companies are navigating different paths. While Apple focuses on refining its existing products, Alphabet is betting big on the future, embracing risk in the hope of long-term gains.
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