January 27, 2004 7:34 AM PST
Audit results move Google closer to IPO
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The report is a crucial step in Google's carefully staged path toward an initial public offering that is expected to take place this spring. Google's board has been awaiting the report before giving the final go-ahead for the company to file a formal stock registration with the Securities and Exchange Commission, according to several executives involved with the process.
Google has repeatedly declined to comment publicly about any aspect of its planned offering.
If the registration is given the green light at a Google board meeting that could take place as early as this week, the public offering would most likely take place during the last week in April.
The privately held Google, based in Mountain View, Calif., has turned its highly popular Internet search engine into a powerful moneymaker by selling space for relatively unobtrusive ads tied to the results of specific searches.
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Google's decision to file for a public offering has generated intense interest both in Silicon Valley and on Wall Street. The widely anticipated prospect of a Google offering has inevitably raised comparisons with Netscape, the once highflying Web browser creator that went public with a value of $2.6 billion in August 1995, and served as a spark for the dot-com boom of the late 1990s.
Several analysts have estimated that Google's initial public offering could establish a market value for the company as high as $20 billion, creating wealth for its founders, Sergey Brin and Larry Page, and turning many employees into multimillionaires.
While some experts expect the event to set off another round of stock market speculation in technology companies and produce a cascade of investment dollars, most argue that Google is such a special case that it is not likely to bring a flurry of me-too offerings with it.
"The hope is that we don't move into a frenzied public offering marketplace," said Jim Breyer, managing partner at Accel Partners, a venture capital firm based in Palo Alto, Calif. "Google is a very big deal in a lot of ways, but there's no company that is private today that is building the same kind of ecosystem.''
The company has not yet picked a lead underwriter for its stock market offering, Google executives say, but several people involved in the process say that J. P. Morgan and Goldman Sachs are the only real candidates to manage the deal. Google is still weighing whether it should offer some shares through a public auction, in part to deflect potential criticism over whether the many investors eager to own a piece of the business will be treated in an equitable fashion.
The Netscape public offering was a crucial milestone in the Internet stock market boom of the late 1990s, which ended with Netscape being acquired by AOL Time Warner and a series of lawsuits and criminal indictments. To help avoid a similar fate, Google executives are proceeding far more carefully than did most of the companies that rode that wave.
"Google will have to be the role model for how to do it under the new rules," said a technology fund manager who is watching the Google preparations closely.
While the consequences of Google's entry into the stock market are still unclear, the company's undisputed financial success has brought increasingly determined competitors trying to slice away at Google's position as the most popular search engine.
Google has not publicly disclosed its finances, but people involved with the company said Google was closing in on $1 billion in annual revenue.
Yahoo has said that it will stop relying on Google as its main search engine and begin deploying its own search technology. Microsoft has also begun a major effort to compete in the search business. On Monday Microsoft introduced an MSN search bar for use with the Internet Explorer Web browser, closely modeled after a similar software application available from both Google and Yahoo.
At the World Economic Forum in Davos, Switzerland, Bill Gates, Microsoft's chairman, said that Google currently was "way better" than Microsoft in search and praised the "high level of I.Q." of Google's researchers. He argued that Microsoft would catch up once it focused its full effort on the task.
At the Comdex computer industry trade show last year, Gates gave a demonstration of Microsoft search technology, which it is expected to introduce some time this year. Analysts remain divided, though, over whether Microsoft will wait to deploy its more advanced search software, blending local and remote searching, until it introduces its Longhorn version of the Windows system.
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