Alphabet's Waymo Puts Pressure on Google's Self-Driving Car Efforts

By Motley Fool Staff Markets Fool.com

Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG)recently announced a new offshoot business, Waymo, which will focus on autonomous driving technology.

Continue Reading Below

In this clip from Industry Focus: Tech, analyst Dylan Lewis and contributor Daniel Sparks explain where Waymo sits in Alphabet's corporate structure and what that means for the fledgling business, how Alphabet has been working toward self-driving car tech so far, and why the company probably won't be releasing detailed breakdowns of Waymo's quarterly performance any time soon.

A full transcript follows the video.

10 stocks we like better than Alphabet
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Alphabet wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

Continue Reading Below

*Stock Advisor returns as of Nov. 7, 2016

This podcast was recorded on Dec. 16, 2016.

Dylan Lewis: Alphabet's self-driving car project doesn't seem to be just a project anymore. It seems like they're emphasizing this within the Alphabet holding structure.

Daniel Sparks:Yeah, we saw that blog post, Waymo is what they're calling it. It'll be interesting to see where they're taking this, for sure.

Lewis:In that blog post, they said "Waymo stands for a new way forward in mobility. We're a self-driving technology company with a mission to make it safe and easy for people and things to move around." The tl;dr here, the very simple explanation of what's going on is, they are taking the self-driving car project under Google X and turning it into an identifiable business under Alphabet. This is awesome, I think, if you're an Alphabet shareholder, because it shows that they're going to put a little bit more emphasis on moving things along and not having these fun projects be just that, that there's going to be a commercialization element to it, and a path to that. But to me, more than anything else, this highlights the benefits of the Alphabet holding company structure, and how under CFO Ruth Porat, they've decided to take a more Wall Street-friendlylook at some of the things that are going on there at Google.

Sparks:Yeah,it definitely highlights the Alphabet structure that they have set up,and the benefits of it. Investors should realize thatthis isn't just some new project that they're doing. This is the graduation of the self-driving carproject to an actual company. This is really one of the first instances where we've seen this under the Alphabet structure,where we can see,where they take this from their Google X area, which is more just moonshots in development,is kind of how they're making it look, and we'rereally seeing that with this particular instance, and thengraduating over to an actual companyand, like you said, putting some pressure on it sothey can start turning it into a business.

Lewis:Yeah,and this is, like you said,not something that happened overnight. The self-driving car projecthas been in the works, I believe, for over eight years at this point. My read on this -- andyou can correct me if I'm wrong here, Daniel -- is, we'renot really going to be seeing actual financials on Waymo broken out when Alphabet gives itsquarterly numbers, at least not anytime soon. It seems like they will probablycontinue to be lumped into other betsreporting for the foreseeable future.

Sparks:Yeah,I definitely think they're going to keep it in other bets,because with Google's revenue at the $22.2 billion and the other bets revenue at about $200 million,virtuallyall of the company's profits coming from the core Google segments, and nearly a $1 billion loss coming from other bets -- I don't think Alphabet is ready, just because Waymo isturning into a company, to startsegmenting out this information on its own. Not only would itprobably draw attention to simply a losing segment, since theyhaven't really monetized this service yet, andlike we said, that's kind of the purpose of it. And, also, it couldpotentially give competitors an edge that theydon't really need to let competitors have, by looking into their business. This is very small to their business, they don't have to report it to investors. It's not material at all, so they might as well keep it under wrapsas long as they can.

Lewis:Yeah. So, while we won't have a ton of financial insights, it seems,what I think this does open the door to is some questions and maybe a little bit morepointed commentary from management in some of those quarterly calls and maybesome of those press releases onspecifically what's going on with the self-driving car project. Again, probably not something we're going to get a ton of insight into immediately, but something that in the coming quarters and years, we shoulddefinitely expect to hear more from.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Daniel Sparks has no position in any stocks mentioned. Dylan Lewis owns shares of Alphabet (A shares). The Motley Fool owns shares of and recommends Alphabet (A shares) and Alphabet (C shares). Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.