Drawing a blank at Google on IPO

Technology

Outlook 2004 : Turning Points

January 11, 2004|By Dan Thanh Dang | Dan Thanh Dang,SUN STAFF

What's the maximum weight of a golf ball?

The hottest spice in the world?

Who said, "Men and women can't be friends because the sex part always gets in the way?"

Many people searching for the answers probably "googled" their way to them. As the largest computer search engine on the Internet, Google Inc. of Mountain View, Calif., responds to more than 200 million search queries a day.

With a name so familiar it has become a verb, Google has emerged as a primary source to resolve almost any question.

But type in "Google IPO" and the responses become as obscure as those you'd get from a Magic 8 Ball.

Not now.

Soon.

Definitely.

It's anyone's guess whether the privately held Silicon Valley company, begun by a University of Maryland alumnus and his Stanford University colleague, will go public in 2004. There are widespread reports that the company has hired financial advisers to arrange its IPO, but the prospect is being watched closely this year more as a harbinger of another tech boom, like the one several years ago when Internet-related public offerings made many people rich quickly.

Some analysts predict Google will raise about $2 billion if it goes public in the first half of this year.

"There is `Google lust' out there," said Matthew Berk, research director at Jupiter Research, a New York company that does online-market research.

"People think it's the savior to a depressed tech sector. Google is a very high-value company, but no one really knows how much money they're making, how much they have stashed in the bank or whether they will go public. I would not be surprised by Google taking absolutely extraordinary means to not have to go public."

"Google is a black box," Berk said. "Their culture is very secretive and that is a great advantage to them."

Google got its start nine years ago after Sergey Brin, a University of Maryland, College Park graduate, met Larry Page when both were enrolled in the computer science doctorate program at Stanford University. They collaborated on a research project to develop a better search engine.

Instead of basing a search on the number of times a word appeared in any Web site, the two developed algorithms that would list Web sites and pages valued most by Internet users.

Sun Microsystems co-founder Andy Bechtolsheim wrote the pair a check for $100,000 on the spot after they demonstrated their project for him. Other investors soon followed.

The two dropped out of Stanford and by 1998 launched Google. The name is a play on googol, which refers to the number 1 followed by 100 zeros.

But even as Google leads among numerous search engines, some analysts believe the company will find it necessary to sell stock or raise money by other means to stay ahead of the field.

Yahoo Inc., a one-time investor, has steadily acquired several companies that will go head-to-head against Google. Software giant Microsoft Corp. is working on a search engine product.

"Google is the strong one at the moment," said Danny Sullivan, editor of SearchEngineWatch.com. "The downside is that when you're the strongest, anything you lose will make you look worse, while your competitors will always look like they're gaining."

"We take all the competition very seriously," said David Krane, a Google spokesman. "Google has always operated in a mood whereby there has been significant competition in the search sector.

"But at the end of the day," Krane said, "we are focused on one thing and that is providing the best search experience on the Web."

Google officials won't comment on the IPO rumor, although the silence seems only to fuel speculation.

Some of Google's fans worry that a public stock offering will impair the company's ability to make business decisions free of constraints from certain regulators and shareholders. Those pressures crushed many technology companies that went public prematurely in the late 1990s.

Some believe a Google IPO will open the door for other new technology stock offerings. Others worry that it could reignite a craze for technology stocks as occurred years ago when the underlying value of companies, or lack of value, was ignored by investors.

Some people caution against hyping a Google IPO into a financial sensation that could artificially inflate tech stocks.

"It's certainly the most anticipated IPO out there," said Richard H. Osgood, chairman and chief executive of Pacific Growth Equities Inc.

"It's a great example of an Internet company where the business model works and they've been doing quite well," Osgood said. "But the market is not waiting around for Google. I don't think Google is going to open an IPO window. The window is going to open in and of itself.

"The business environment is clearly getting better," Osgood said. "The Nasdaq is up 70-something percent from its lows last October. The combination of those two things is more important than any single deal.

"We're looking for '04 to be a good year on the capital market side," Osgood continued. "But will Google go public? Until they answer that question, it's just a lot of guessing."

Don't count on answers from Google, except possibly to your trivia questions:

1.62 oz.

Capsicum hot pepper.

Billy Crystal in When Harry Met Sally.

TIMELINE

1995

Sergey Brin, a graduate of the University of Maryland, College Park, and Larry Page develop technology that becomes the foundation for Google.

1998

Brin and Page postpone their studies, raise $1 million and launch Google in a friend's Menlo Park, Calif., garage with four employees.

2004

An initial public offering of Google stock is rumored because the company needs money to fend off competition.

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