Cramer: Here’s why Google’s reorganization matters

An attendee uses a computer to sign in for the Google I/O developers conference on May 15, 2013 in San Francisco, California.
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While some may dismiss Google's announcement to reorganize its operating structure, the move holds incredible importance for stockholders and prospective investors, CNBC's Jim Cramer said Tuesday.

"It matters because the price-to-earnings multiple has been controlled by a mishmash of companies, and if you can see the profitability being broken out as a media company, and we all saw what happened to old media last week, then you might want to pay up for Google," Cramer said on "Squawk on the Street."

On Monday, the tech giant said it would become a subsidiary of a new company called Alphabet. The new umbrella company will be run by Google CEO Larry Page and co-founder Sergey Brin, while Sundar Pichai will take over as Google's new CEO in the company's fourth quarter.

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Pichai is currently a senior vice president in charge of Internet businesses.

"When Amazon broke out Web Services you thought 'holy cow, this company is extremely profitable. I never knew this,'" Cramer said.

Amazon unveiled sales numbers for its cloud computing business in April and said it rose 81 percent in the second quarter.

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Both classes of Google shares were up more than 5 percent in early trading Tuesday.


Disclosure: Cramer's trust owned Google stock when this article was published.