High-speed communications company Aalyria is spinning off from Google’s parent company Alphabet Inc. (GOOGL). Google will retain a substantial stake in the startup, though it will operate as its own entity.
Here are the details of the deal and what’s next for telecom company Aalyria after the spin off is set in stone.
The Google-Aalyria spin off comes as a surprise.
Google’s move to spin off Aalyria is a surprise, but it isn't the only news. Up to this point, Aalyria operated as a secret initiative within Google. At the time, it was dubbed Minkowski.
With the publicization of Aalyria, Google is making known its plans for “hyper fast, ultra-secure, and highly complex communications networks that span land, sea, air, near space, and deep space,” according to an Aalyria press release.
What is Aalyria?
Aalyria operated as an experimental project under the Alphabet umbrella, but Google is going big with its investment. This is likely the result of an ad revenue slowdown.
The spun-off company will continue to focus on broad telecommunications utilities. CEO Chris Taylor will lead the charge. Several Google veterans will hop over to the Aalyria side to help the company succeed.
One technology that Aalyria boasts is called Tightbeam, which prioritizes data connectivity and reliability through weather and atmospheric conditions. Aalyria says, “Tightbeam radically improves satellite communications, Wi-Fi on planes and ships, and cellular connectivity everywhere.”
What’s next for Google’s telecom company?
The U.S. Defense Innovation Unit has awarded an $8.7 million commercial contract to Aalyria. That will help get the startup off the ground even amid an unpredictable economy. The contract is a result of Google’s public sector initiative announced earlier this year. Google says, “Google Public Sector, a new Google division, [...] will focus on helping U.S. public sector institutions—including federal, state, and local governments, and educational institutions — accelerate their digital transformations” and all, but there comes a time when a company needs to start reaping the fruits of its labor.
Aalyria will also retain the support of Google via a minority stake (as of right now, we don’t know exactly what percentage of shares Google will hold).
While the spin off materializes, Google stock is fluctuating. Shares are down less than a full percentage point as of Monday, Sept. 12. Year-to-date, GOOGL has lost nearly a quarter of its market capitalization, in part due to the broad economy but also as a result of strengthened digital ad regulations that cut into its revenue. With Aalyria officially spinning out from Alphabet, Google stock will still represent Aalyria, even if marginally. That means interested investors can stay in a blue-chip stock to potentially profit off of the startup’s future.
However, Google is making moves. The publicly traded company has officially transferred its relevant intellectual property, patents, office spaces, and other assets to Aalyria. With this, the company can get Aalyria off the ground to start earning revenue and help Google see returns on its 10-year investment.