By John Kell and Alan Murray
October 2, 2015

When are two companies better than one?

 

Alcoa this week announced it was splitting in two, separating the business of making aluminum from that of crafting “value-added” parts for airlines, autos and other industries. Meanwhile, the Hewlett-Packard board formalized plans to split its printer and personal computer business from its server and data business.

 

The justification for such splits usually comes down to two arguments: 1) “unlocking value” and 2) “improving focus.” The first assumes investors aren’t smart enough to properly value two very different businesses run by the same company. The second assumes managers aren’t good enough to run two very different businesses at the same time.

 

There may be truth to both arguments. But I like the fact that Google is taking a different approach in its creation of a new company, Alphabet, that Larry Page says will allow it to “run things independently that aren’t very related.” The first response of most people to the Alphabet announcement was to scratch their heads. The Wall Street Journal takes a more serious look at the strategy this morning.

 

Google is an anomaly – “not a conventional company,” as Page puts it. Its peculiar approach to solving the challenge of running disparate businesses under one company may be relevant to no one else. But the painful process of splitting and merging businesses also has its limitations – for everyone, at least, besides the investment bankers.

 

I’ll be interviewing Page on his unique approach to business on opening night of our Fortune Global Forum in San Francisco November 2. This CEO-only event is by invitation, but let me know if you are interested (CEO Daily readers get special consideration.) We will also cover it thoroughly on Fortune.com.

 

Enjoy the day.

 

 

 

 

Alan Murray
@alansmurray
alan.murray@fortune.com

Top News

Job growth expected to accelerate

Economists expect U.S. payrolls to show an increase of 203,000 for September, bouncing back from softer job growth in August despite worries of a China-led global economic slowdown. That brisk pace of hiring could help convince the Federal Reserve to possibly raise interest rates at one of its two remaining meetings this year. The Labor Department’s monthly employment report, due Friday morning, is expected to also show the economy is growing enough to push the jobless rate lower in the months ahead.
Reuters

Experian data breach hits 15 million

Credit reporting agency Experian said a data breach at one of its business units may have compromised the personal records of about 15 people, including customers of T-Mobile. It is the latest security breach to involve millions of accounts in the U.S., this time due to a hacker (or hackers) obtaining access to an Experian server. Some of information accessed included names, social security numbers and passport IDs, but no payment card or banking information. T-Mobile CEO John Legere, meanwhile, issued a statement saying he was “incredibly angry” about the data breach, adding “This is no small issue for us.”
Fortune

Hurricane no longer seen as threat

Hurriance Joaquin is not expected to be a major threat to the U.S. East Coast, as a westerly shift in the forecast track of the storm spared the Carolinas, New York and New Jersey. Despite the more favorable outlook, Joaquin could still cause flooding from South Carolina to New England and it battered the Bahamas for the second day on Friday.
Reuters

UAW votes against Fiat Chrysler contract

Members of the United Auto Workers have defeated a four-year contract proposal with Fiat Chrysler Automobiles that its leaders had recommended, with 65% of the workers voting to reject the contract. The defeat – a blow to the union that makes deals with Detroit’s Big 3 auto companies – now means the UAW has to decide if it wants to again bargain with Fiat Chrysler for a better deal, seek a re-vote on the existing pact, or try to complete contract talks with Ford or GM.
USA Today

Neiman Marcus lays off 500 workers

Luxury retailer Neiman Marcus became the latest to announce a round of job cuts, shortly after similar announcements from Whole Foods Market and Walmart. None of the cuts at Neiman Marcus involve sales staff and the job eliminations amount to about 3% of the retailer’s total workforce of 16,000 employees. The re-organization is reportedly meant to allow Neiman to invest in other areas of the business. The cuts also come two months after Neiman filed for an IPO for the second time since 2013.
Fortune


Around the Water Cooler

Why October is a great month for stocks

Yesterday’s CEO Daily noted that October has gained notoriety for notching more than a quarter of stock market drops that exceeded 10%. But Fortune’s Stephen Gandel notes it is also the month in which the markets tend to rebound. October has also been the kickoff month for some of the stock market’s largest rallies. So while investors have a lot to worry about today, it isn’t a guarantee that Wall Street will suffer another October decline.
Fortune

Chick-fil-A’s plan to invade New York

Having conquered the South, Atlanta-based restaurant chain Chick-fil-A is making its first serious effort to tackle the nation’s most competitive food market starting this weekend, when a 5,000-square-food location opens near Herald Square in midtown Manhattan. The new store, Chick-fil-A’s largest ever, will be the company’s first free-standing location in the city. Even before the move north, Chick-fil-A is already massive: in 2013 it surpassed KFC as the largest chicken fast food chain in the U.S., though it operates less than half the number of stores.
Time

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