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Alphabet Inc. (GOOGL - Free Report) recently announced completion of its reorganization and formation of a new company, XXVI Holdings Inc. The unique name signifies 26 expressed in Roman numerals, the number of letters in the English alphabet.

Alphabet is now officially a corporate parent and Google and Other Bets are its subsidiaries. Other Bets includes Google Venture, Google Fiber, Waymo, Verily, Calico and Nest, which were previously under Google. Google will now become a limited liability company (LLC) from a corporation. XXVI will own equity of each Alphabet subsidiary.

A filing on Friday with the Federal Communications Commission disclosed the new structure. It stated that Alphabet and Google are now in a position to function in a more efficient, economical and transparent manner with a better focus on revenue generation.

Alphabet Inc. Revenue (TTM)

An Alphabet spokesperson Gina Weakley stated, "We're updating our corporate structure to implement the changes we announced with the creation of Alphabet in 2015."

Alphabet shares have rallied 17.8% over the last year, outperforming the 14.1% gain of the industry it belongs to.

The Rationale

With the reorganization, Alphabet officially puts each of its units to a separate company under its umbrella. The purpose is to allot independent operating heads (CEOs) to manage each unit. This will lead to better operating efficiency and help the nascent businesses to achieve commercialization and profits.

The change will help the company improve accountability and better manage different areas. It prevents potential risks or challenges from spreading from one business to another. The separation also helps limit exposure of different obligations of an LLC.

Zacks Rank and Stocks to Consider

Alphabet has a Zacks Rank #3 (Hold). Better-ranked stocks in the broader technology sector include Applied Materials (AMAT - Free Report) , Activision Blizzard (ATVI - Free Report) and Applied Optoelectronics (AAOI - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Applied Materials, Activision and Applied Optoelectronics is currently projected to be 17.1%, 13.6% and 17.5%, respectively.

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