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Google's market value expected to rival McDonald's

By MATTHEW FORDAHL
The Associated Press

DOUGLAS C. PIZAC / AP Google co-founder Sergey Brin, right, and rival Yahoo! co-founder Jerry Yang shake hands at Allen & Co.'s annual media conference in Sun Valley, Idaho, earlier this month. Yahoo! was an early investor in Google.

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The Mountain View, Calif., company said 24.6 million shares will be sold for an estimated $108 to $135 each, depending on the unusual auction Google plans as early as next month, according to a regulatory filing.

That would mean between $2.66 billion and $3.32 billion in stock would be sold in the initial public offering. However, the amount the company itself expects to raise is $1.66 billion, because some of the shares are being sold by existing stockholders.

It would be the eighth-largest IPO in history, ranking higher than most that took place during the dot-com boom of the 1990s. Unlike those companies, however, Google has consistently been profitable and has posted steep revenue increases.

"This is much bigger than a search engine," said David Berkowitz, a spokesman for icrossing, a search-engine marketing company headquartered in Arizona. "The whole tech sector is [watching] on one hand and everyone else who's wondering can any company sustain this kind of value right now."

Google, which is offering just 9 percent of its stock, would have a market capitalization between $29 billion and $36 billion, counting shares held by insiders. The average in the S&P 500 is $21.25 billion. Rival Yahoo! has a market cap of nearly $38 billion.

Once trading of the shares begins on the Nasdaq Stock Market, Google expects to have the ticker symbol "GOOG."

Shares will be distributed in an auction designed to give the general public a better chance to buy stock before trading begins. In the past, companies' IPO shares have been restricted to an elite group picked by investment bankers handling the deal.

Analysts expressed some surprise that the search behemoth — given its "Do No Evil" mantra and its desire to democratize the IPO process — is not going to split its stock to bring the price within reach of average investors.

"I hate to say this ... but the thing is becoming somewhat like a circus," said Mark Herskovitz, manager of Dreyfus Premier Technology Growth Fund.

One of the most eagerly awaited public offerings in years, Google has become one of the world's leading brands, its search engine so widely used that its name has become a verb for looking up information.

Google founders Larry Page and Sergey Brin, who created the company in a Stanford University dorm room in 1998, also stand to profit handsomely from the IPO along with its venture-capital investors.

In the filing, Google said Page and Brin will each sell 1 million of their shares, generating about $117 million for each based on the midpoint of the company's range, $121.50 a share. They will still own more than $4.5 billion worth of stock each, and their preferred shares will carry more voting power than the stock traded publicly.

The stock offering also will provide a big payoff for Yahoo! and America Online, which were early investors in Google. Yahoo! is selling 549,000 shares; AOL will unload 867,000, according to the filing. At $121.50 a share, Yahoo! would collect $67 million, while AOL would reap $105 million.

Google's filing with the Securities and Exchange Commission gave an updated picture of the company's booming growth, fueled almost entirely by advertising linked to online searches.

For the three months ended June 30, Google earned $79.1 million, or 30 cents a share, compared with $32.2 million, or 12 cents a share, in the same period last year. Sales more than doubled, to $700 million from $311 million last year.

Yesterday's document was the fourth revision of Google's IPO filing, which was released in April.

Material from The Baltimore Sun and Reuters is included in this report.

Copyright © 2004 The Seattle Times Company

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