The new company will function as a "collection of companies" with Google as the largest one. The idea behind the new organisation is to slim down Google, with Alphabet taking over companies such as Calico, focused on health and life sciences, but also drone delivery effort Wing, and its venture capital arm Google Ventures.
Co-founder Larry Page wrote in a statement:
We’ve long believed that over time companies tend to get comfortable doing the same thing, just making incremental changes. But in the technology industry, where revolutionary ideas drive the next big growth areas, you need to be a bit uncomfortable to stay relevant.
Our company is operating well today, but we think we can make it cleaner and more accountable. So we are creating a new company, called Alphabet.
Page will be taking on the role of chief executive of Alphabet, with Sundar Pichai taking over as chief executive of Google.
Alphabet will replace Google as publicly-traded entity, with Google shares automatically converting to Alphabet shares.
Shares soared by five per cent in after-hours trading following the announcement, climbing to 665.0.