Is Alphabet Making the Right Move in Broadband? (or, Why Did Google Fire Broadband Team?)

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There has been a recent changing of the guard at Alphabet Inc. (NASDAQ: GOOGL). Access, the unit of the Alphabet that mostly controls Google Fiber, is getting a new chief executive officer, but in the process it is also releasing a few hundred employees. The idea is that Google Fiber will be heading in an entirely new direction, but is this the right move?

Greg McCray will be taking the helm as CEO for Access, taking over for Craig Barratt, who left this role back in October. McCray has been a broadband executive, with his most recent stint as the CEO of Aero Communications.

Originally Barratt stepped down amid cutbacks within Access. At that time, layoffs were announced and Google Fiber was suspended from being rolled out in 11 new cities. The picture is becoming clearer now that Access is heading in a new direction. Google Fiber previously had provided its fiber services through underground fiber-optic cables, but now it seems that the firm is aiming to start providing this service wirelessly.

According to a spokesperson, hundreds of Access employees are not all being let go per se, but some are shifting from their jobs in Access to different departments within the Alphabet umbrella. Google Fiber cut 9% of its workforce when Barratt stepped down.

It’s worth noting that this particular field is not Alphabet’s strongest suit. Major telecom companies have dominated this field, and as much as Alphabet wants to further break into this field, it will be an uphill battle for some time.

Ultimately, it begs the question whether the fiber business is too crowded. There are literally hundreds of companies that provide this service across the United States alone, with some big names way ahead of Google Fiber. Verizon is perhaps the top dog out of the fiber broadband providers. Other notable names that cover a larger population than Google Fiber, are AT&T, Time Warner, CenturyLink and Level 3 Communications, just to name a few.

Even though the space may be crowded, it doesn’t look like Alphabet will back down. When asked if Access would potentially shut down after this latest round of cutbacks, a spokesperson pointed out that this unit will not be going away but it is in fact one of the four core revenue drivers of Alphabet’s “Other Bets,” or smaller units apart from Google.

Shares of Alphabet were trading at $840.25 on Thursday, with a consensus analyst price target of $990.84 and a 52-week trading range of $672.66 to $867.00.