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Venture capitalist Michael Moritz made a large profit from the Google IPO. But, Moritz says you're only as good as your next investment.
On the homepage of Google, the world's most popular internet search engine, there is a button marked "I'm feeling lucky". It could almost have been created especially for Michael Moritz.
Michael Moritz received a gigantic return on the $12.5 million he invested in 1999.
The Welsh, California-based venture capitalist has just received one of the largest payouts from a dotcom company, thanks to the fabulously canny investment he made when Google was a fledgling start-up whose staff organised meetings round a ping-pong table.
When Google floated in August, its initial public offering raised $1.67 billion and its early investors, according to financial commentators, were rewarded with "the biggest pay-off in venture history".
Moritz received a gigantic return on the $12.5 million he invested in 1999 on behalf of his employers, Sequoia Capital, whose nine per cent slice of Google is now worth $3 billion. Google itself is today valued at around $33 billion.
Moritz is too modest to say how much he has made personally from the sale - he is reported to have received up to $280 million in cash, plus stock worth more than a $1 billion - although he dismisses reports he is now a billionaire as "wickedly overstated".
But it is clear that he has amassed a fortune, at least on paper, which has catapulted him high up Britain's rich list.
The 'maniac devotion' of Google founders Larry Page and Sergey Brin (right) persuaded Moritz to invest. "I don't want to talk about how much I'm worth," he says, with a smile, at the pristine offices of Sequoia Capital in Silicon Valley, where he has worked since 1986.
The former journalist is feted in investment circles for the acumen that led him to back not only a winning horse named Google, but a host of other technological successes, including Yahoo!, whose potential he clocked in 1995, when few people understood the growing importance of the internet.
Sequoia's sleek, sun-drenched wood- and glass-panelled HQ, with its airy meeting rooms and scribbled-on whiteboards ("Americans can't even speak without using a whiteboard," says Moritz) sits in the middle of a tree-lined business park and is a long way from Cardiff, where he was raised by German- Jewish refugee parents. Back then, he recalls, the closest thing to an entrepreneurial role model was "a local guy who ran a fleet of hot dog vans and wore jeans and a blue blazer".
But after attending Howardian High School in Cardiff, where he was head boy, Moritz read history at Oxford, and began to get a sense of what he wanted out of life.
"What I did know was that I did not like not having any money," he says. "My family were comfortably middle class, but I remember looking around central London and, suddenly, my horizons were opened very wide."
He caught the journalism bug while editing the university's Isis magazine and set his heart on a career in Fleet Street.
In the hope of securing a job at The Daily Telegraph, he was invited to meet the newspaper's then editor, W F Deedes, one rainy afternoon in 1976. The meeting proved to be a crucial moment in Moritz's life: though it did not lead to job on the paper, it set him on his way to a new career as an investment wizard.
"I was telling him about an opportunity that I had to go to America, and I was wondering whether to accept it or not," recalls Moritz. "It was just a half-hour chat and was, I'm sure, the least consequential thing he did on that particular day of his life.
"But for me, it was one of the most consequential encounters I ever had, because he said to me: 'If I was a young man in your shoes today, I'd go to America and not look back'. His advice was a big part of the reason I moved to America."
And so, after business school in the United States and a spell working for Time magazine - which he quit when the frustrations of "a large corporation with too many constraints" became too much - Moritz headed for Silicon Valley.
"I just loved it," he recalls. "I'd never seen anything like this place, where all these 25-year-olds were starting companies."
He began knocking on doors, but his lack of experience prompted firms to "look askance at my mongrel-like background". Luckily, one man was impressed: Don Valentine, founder of venture firm Sequoia, gave him a job. "I only qualified because of the minority hiring programme," jokes Moritz, modestly, in a British accent that betrays few hints of the years he has spent in America.
Energetic, yet enormously composed, Moritz, a trim 50-year-old with rimless, round glasses and cropped, greying hair, has remained unmoved by "all the hoopla" surrounding Google's flotation, dismissing it as "nothing more than a sideshow".
"I understand why everybody's fascinated with it," he says. "But it's not as if it was a big surprise. It's something that's been coming for a long time."
He says he is not particularly excited by the company's rising stock price (which is up considerably since its $85 debut) and refuses to see it "as a barometer of the health of the company", cautioning that its waverings can represent "a major emotional distraction for employees".
The story of Google's success is breathtaking, emerging as it did from the carnage of the dotcom crash to become a tool used by millions each day and a brand so ubiquitous it has entered the dictionary.
Moritz puts its ascendancy, in part, down to the "fabulously disciplined" approach of Google's founders, Larry Page and Sergey Brin.
The two were Stanford graduates in their mid-twenties when Moritz met them. Their "manic devotion" to their business persuaded him to invest $12.5 million at a time when the firm had only a dozen employees.
The decision was made during "the hurricane that was 1999, when lunacy and madness were in the air and good reason had been temporarily set aside", Moritz says.
But he was convinced by the product's potential and its "fabulous" name, a play on the word "googol" - the number one followed by 100 zeros.
"Just like Apple, just like Yahoo!, people dismiss it and say it sounds trite and silly, but it has one great virtue: once you've heard it, you don't forget it."
Other investors shied away because of the "free" nature of the service Google offered, but Moritz saw parallels with the captive audiences of television and radio and the huge advertising revenues that they attracted.
He remains, however, staggered by its success. He slowly shakes his head when asked if he foresaw it. "Every time one of our companies experiences tremendous good fortune, we are as astonished as the next person."
Rivals are dazzled by the steely nerve that informs Moritz's "leaps of faith", and enables him to detect markets as they emerge. One fellow venture capitalist admitted recently he was "amazed at Mike's ability to see value where I can't".
Moritz says his decisions are part instinct, part analysis. "It's a perpetual test of your mettle because it doesn't matter about all the investment successes you might have had yesterday, it's about the climb up the next peak."
Moritz, who lives in San Francisco with his wife, American novelist Harriet Heyman and their two teenage sons, has little time for the "distraction" of extravagant acquisitions and says his wealth hasn't changed his lifestyle.
"It's not as if on a day a company goes public, a whole set of Brink's trucks pull up at the front door and spill gold bricks on to your porch. It's only paper."
He owns a house in Tuscany, where he enjoys painting, but has no desire to retire and buy a football team just yet. Instead, he prefers to stay "very focused on what we do here". Despite celebrating his 50th birthday recently, he isn't thinking of slowing down.
"I have one partner here who is 74 years old and another who is 71," he says. "This is a business where you have to stay youthful in temperament. It's about having abiding and great belief in the ideas of people who are 24 and 25 years old, and that's a very stimulating environment.
"Wealth makes a few things a lot easier, but it does not have that much of an effect on your life. It means you don't have to worry about spending 100 bucks in a bookstore or jumping on an aeroplane. But you can only eat so much in a day."
Source: Telegraph.co.uk
Fidelity Investments, the world's largest mutual funds manager, bought $549 million of stock in Internet search engine Google, about 23 percent of the shares sold in the company's IPO in August.
Boston-based Fidelity reported in a filing with the U.S. Securities and Exchange Commission that it holds 5.21 million Google Class A shares. That's about 16 percent of Class A stock and 1.9 percent of Google's total shares outstanding.
Yesterday, CBS MarketWatch reported that Fidelity had originally bought 15.5 percent of Google stock.
Google, owner of the world's most-used Web search engine, and some of its early investors raised $1.92 billion in an initial public offering last month. Fidelity's bet on Mountain View, California-based Google could persuade other investors to buy the stock, analyst David Garrity said.
``Fidelity obviously got to their size by being relatively astute investors,'' said Garrity, an analyst with Caris & Co. in New York. ``You can't ignore that.'' Garrity rates Google shares ``average'' and doesn't own the stock personally.
Google shares today rose $3.02 to $105.33 at 3:59 p.m. New York time in Nasdaq Stock Market composite trading. The stock has risen 24 percent since the IPO.
Fidelity spokesman Adam Banker and Google spokesman David Krane declined to comment.
Google sold 19.6 million Class A shares for $85 each, raising $1.67 billion in the IPO, which was distributed through an Internet-based auction. The process was designed to give individual investors a chance to buy at the same time as institutions like Fidelity. Google then sold another 2.94 million shares to its underwriters, led by Morgan Stanley and Credit Suisse First Boston, bringing the total raised to $1.92 billion.
Google has 33.6 million Class A shares and another 237.6 million Class B shares. The company's 31-year-old co- founders, Sergey Brin and Larry Page, and other early investors hold Class B stock, which carry 10 votes per share in company elections. The Class A shares get one vote each.
The Fidelity Growth Company Fund owns 1.83 million Google shares, the filing stated. They were worth about $192.8 million at today's close. The filing didn't say what funds hold the rest of Fidelity's stake.
The Google stake is a relatively small investment for the $21.7 billion Fidelity Growth Company Fund, said Christopher Traulsen, an analyst with research firm Morningstar Inc. in Chicago. About 0.9 percent of the fund is now invested in Google stock, Traulsen said.
The Fidelity Growth Company Fund, managed by Steven Wymer, tends to place bigger bets on technology companies than most large- cap stock funds.
The fund had 33 percent of its holdings in information technology stocks on June 30, the most recent data released by the company. The Russell 3000 Growth Index had 28 percent in those types of stocks.
The fund's top holdings, as of June 30, included Microsoft Corp., Network Appliance Inc., Qualcomm Inc. and Red Hat Inc.
Wymer, who has managed the fund since January 1997 and has been with Fidelity for 15 years, is ``willing to be aggressive in the pursuit of growth if you look at the technology weighting,'' Traulsen said.
Wymer typically holds some companies like Google ``that are maybe younger and offer more rapid growth potential than some of the big names he owns at the top of the portfolio,'' Traulsen said.
Google earned $143 million, or 54 cents a share, in the first half of this year, more than doubling its net income of $58 million, or 23 cents, in the year-earlier period. Revenue more than doubled to $1.35 billion.
Internet Search Companies
The Fidelity Growth Company Fund has a 1.9 percent return in the last 12 months, ranking behind 72 percent of similarly managed funds, according to data compiled by Bloomberg. Over five years, it has averaged an annual loss of 2.8 percent, placing it ahead of more than half its peers, the data show.
Fidelity's investment in Google could help boost the stocks of other Internet search companies, including Yahoo! Inc. and Ask Jeeves Inc., Caris's Garrity said.
Google generates most of its revenue by selling small text advertisements that appear above or next to Internet search results.
Fidelity's investment shows that among institutional investors ``there's a lot of confidence in the growth potential of online paid search,'' Garrity said.
Fidelity also owned about 7.9 percent of Sunnyvale, California-based Yahoo's stock as of June, according to Bloomberg data.
The mutual fund company could help support Google's share price over the next five months if it buys more stock that will come on the market, Soleil Securities Corp. analyst Laura Martin said.
Employees and early investors are restricted from selling some stock they received before the IPO for as long as 180 days after the offering. The first so-called lock-up agreement ended Sept. 2, allowing insiders to sell 4.67 million. The next lock-up expires Nov. 16. It will allow another 39.1 million Google shares to be sold.
That could potentially more than double the number of Google shares on the market, causing the price to fall, analysts including Mark Mahaney of American Technology Research in San Francisco have said.
Source: Bloomberg.com
The parent company of mutual-fund giant Fidelity Investments, FMR, holds 15.5 percent of Google's Class A stock, according to a filing with the SEC.
FMR said it owned more than 5.2 million shares of the Internet search engine's stock as of Aug. 31.
The Fidelity Growth Company fund (FDGRX: news, chart, profile) owned 5.4 percent of the shares at the end of the month.
Mountain View, Calif.-based Google (GOOG: news, chart, profile) made its widely-anticipated public debut on Aug. 19.
Google stock ended Friday's session up $3.02, or 3 percent, at $105.33.
Source: CBS Marketwatch
Google is delaying its IPO by a week because of logistical problems related to institutional investors registering to bid on the shares, according to a person familiar with the matter.
The delay isn't being caused by a technological problem or a lack of bidders, the person stressed. Rather, the process of registering bidders for the auction-style IPO is taking longer than anticipated, the person said.
Part of the problem, the person said, was that Google's IPO, which is being led by Morgan Stanley and Credit Suisse Group's Credit Suisse First Boston, is being run through an auction format that had never been tried before. "It's all new," the person said. "We just hit a speedbump."
News of the possible delay was first reported by CNBC.
Officially, Google had never set a date for the deal, though people familiar with the matter had pegged the date for next week.
What's more, Google had said it would be about a week from the time it activated the Web site on which investors can register until they priced. That site was activated last Friday.
Interesting that this is a one source story.
Source: BattleMedia.com
Google is looking at an emergency stock buyback plan after it realised it had forgotten to register staff shares under federal and state regulators.
The company, which is teetering on the edge of an expected $36bn IPO, is now offering to rescind some 28 million shares and stock options granted to current and past staff, as well as consultants, between September 2001 and June 2004.
In an SEC statement filed yesterday, it said: 'These option grants and stock issuances may have violated the Securities Act of 1933 and the state securities laws... The rescission offer is intended to address these federal and state securities laws compliance issues by allowing the holders of the options and shares covered by the rescission offer to rescind the underlying securities transactions and sell those securities back to us.'
Google is offering to repurchase the shares and options at prices ranging from $0.3 to $80 with its own cash. The company has about $550mn in its coffers.
Shareholders will receive the price originally paid, plus interest, while those with options will get 20 per cent of the price they could buy at, plus interest. There are 1,105 stock holders with 23,240,668 shares, and 301 people with options on 5,592,248 shares that stand to benefit from this offer, which ends next month.
The company said that one of its officers and a 5 per cent stock holder are eligible for the rescission offer, but have indicated they will not take it up.
The proposal has yet to be approved by the SEC.
Source: PC Pro.com
Many investors still aren't aware of some important parts of the IPO bidding process, including the fact that if they don't get a bidder ID number soon, they won't be able to bid at all.
On Tuesday, some of the 28 brokerage firms offering customers a chance to bid for Google's first public shares of stock started displaying blurbs on their Web sites, announcing their participation in the deal. But the blurbs said little else.
``Before you can participate in the offering through us, you will need to obtain a bidder ID prior to the opening of the auction,'' said identical notices on Web sites for E*Trade, W.R. Hambrecht and Fidelity Brokerage Services.
Each steered investors to Google's IPO Web site, www.ipo.google.com, to get the 20-digit number.
When the auction starts, which could be any day now, Google will stop offering bidder IDs to investors, said some people briefed on the deal.
Brokerage firms haven't said much so far because they are still awaiting approval from the Securities and Exchange Commission for the way they'll explain the complex auction to customers.
Here is how the events may unfold:
• Last Friday, July 30, until probably no later than this Friday: Those interested in bidding must get bidder IDs at www.ipo.google.com.
• By Friday or Monday: Bidding will open. Access to bidder IDs will be shut off.
Investors are expected to have about four days in which they can enter the number of shares they want, and at what price, by filling out IPO bidding forms at their brokerage firm's Web site, or by calling their brokers. Investors can make multiple bids, and amend them during this time, as often as they wish.
Investors should be prepared to have enough money in their brokerage accounts to pay for all the shares they have bid for, should their bid be accepted.
There may be only a short window of time between when the bidding stops and when investors are informed that their bid has been accepted. If an investor doesn't have enough money in his or her account during that time -- which could be as little as an hour -- the brokerage firm may cancel the investor's bid or bids.
• Next week, possibly Aug. 10 or 11: Investors will get an e-mail from Google saying the company has asked the SEC to declare the deal ``effective,'' the last step before closing the auction bidding.
• The day after the ``effective'' e-mail alert: Investors will get an e-mail from Google saying the deal is effective, meaning the auction could close in as little as an hour. Soon afterward, investors will be notified that their bid has been ``accepted.'' They can cancel their bids until they receive that notification, but not afterward. Investors won't be notified if their bid has been rejected.
• Later that day or night, on ``effective'' day: Investors will get an e-mail from their brokerage firm telling them whether their bid was among the winning ones. They'll learn how many shares they got at the IPO price. They shouldn't get fewer than 80 percent of the number of shares they bid for at prices at or above the IPO price.
• Day after ``effective'' day: Google shares will start trading on the Nasdaq stock market, under the symbol GOOG.
Source: Silicon Valley.com
Google will become public sometime in August, offering its shares for as much as $135 each.
That would give the company a maximum market capitalization of $36 billion — more than twice the value of Amazon.com and almost three times larger than that of Apple Computer.
Already, the deal — which is expected to raise $3.3 billion — has drawn comparisons to bubble-era IPOs.
"Back then, companies overestimated the Internet industry," said Irv DeGraw, an IPO analyst and finance professor at Washington College in Maryland. "Google may be doing the same thing."
In 1998, shares of theglobe.com opened for trading with a market capitalization of nearly $2.5 billion. At the time, the company had high hopes for its online community business.
"Community sites [are] a solution to the challenges posed by the Internet's growth and complexity," the company said in its prospectus.
Theglobe.com said it expected revenue from advertising and noted that the Internet ad market was expected to grow to $7.7 billion in 2002.
But by 2001, theglobe had lost virtually all of its value, was delisted from the Nasdaq, and traded on the pink sheets for less than 10 cents a share.
Nobody is saying that Google will be a flameout. But even proven brands, like Yahoo!, have been pushed off their peaks. Its shares are more than two-thirds below their all-time high.
And while Google is more financially solid than theglobe.com and other companies that debuted in the late 1990s, the company still has challenges.
"My question is whether or not the search engine business is sufficient enough to warrant this kind of valuation," said DeGraw. "I don't think it is."
"Google has been successful with one product," added Andy Beal, vice president of WebSourced, a search engine marketing company. "They need to diversify."
According to a recent survey by Standard & Poors, six out of 10 Google users said that they would go elsewhere if a better search engine came along.
"They shouldn't rest on their laurels and think, like Netscape did in the 1990s, that they are going to be the market leader forever," Beal said.
The company is attempted to address concerns by aggressively rolling out new features and technologies, such as Gmail, a free e-mail service that includes an unprecedented gigabyte of free storage space.
But according to S&P's survey, less than 25 percent of those polled would readily switch e-mail addresses to get even unlimited free storage.
"Google is not a sure thing," Beal said, adding that among things to watch are search-engine announcements from Yahoo! and Microsoft, as well as the six-month anniversary of the offering, when employees will be able to sell stock.
Source: NY Post
Yahoo wants more than its allocation of just 5.5m shares in the upcoming Google IPO, as controversy over the sky-high price of Google's shares announced on Monday.
Yahoo, headed by chairman and chief executive Terry Semel, is demanding more shares from upstart Google in a contract dispute stemming from the partnership that the two companies formed in 2000.
In its filing to the Securities and Exchange Commission, Google said that Yahoo! had been using search technology since June 2000 but nowadays contributed only 3% to Google revenues. Google said it was ending the arrangement this month.
Neither Yahoo! nor Google would comment on the specifics of the dispute but it is understood that Yahoo! is claiming that its contribution a couple of years back merits a larger share allocation.
Google says its share price when it goes public will be between $108 (£58.66) and $135. If Yahoo! sells the 549,888 shares it has been promised for the mid-point price of $121.50 it would net around $67m (£36.4m).
Not only is Yahoo! miffed at its share allocation, it is a party to the only lawsuit of note Google is facing, and which the company admits could hit future profitability. Google is being sued by Overture Services, which in 2002 when the suit was filed was an independent search company. It is now owned by Yahoo!
Overture claims Google's Adwords programme infringes its patent. Google is fighting the case but admits a loss would be damaging.
Google executives, meanwhile, have launched their initail public offering roadshow to 800 analysts at the Waldorf Astoria hotel in New York. The media was not allowed to attend.
The company discussed its latest earnings, which have disappointed some potential investors.
Google reported net income of $143m and revenue of $1.35bn in the first six months of 2004, up from net income of $58m and revenue of $559.8m in the year-ago period.
An analysis of the figures reveals that growth rates and margins came down, particularly during the last three months, as they did with other internet companies, but still not the sort of news that is welcome before a flotation.
One analyst, Connor Browne of Thornburg Investment Management, told reporters he was 'pretty disappointed' with Google's sequential revenue growth of 7% over the first quarter. A year ago that growth figure was 25%.
Source: This is London.co.uk
With Ask Jeeves and MSN eliminating paid inclusion listings from their search results this month, Yahoo is the lone holdout among major search engines to let advertisers pay to have their Web pages in its search results.
Unlike paid placement, advertisers paying for inclusion in a search index are not promised placement. Instead, they are promised that their sites will be included in a search index. The practice has advantages for businesses with constantly changing Web pages that are not indexed as frequently by Web search spiders.
Search leader Google has taken a firm stand against the practice, vowing never to accept payment for inclusion. Its IPO filing makes its stance explicit: "Our search results will be objective and we will not accept payment for inclusion or ranking in them."
Google’s stance has gained converts. Ask Jeeves this month banished its last vestige of paid inclusion, Site Submit, which let Web publishers pay to ensure Ask Jeeves’s Teoma spider scanned their sites. The Emeryville, CA, search engine eliminated its Index Express XML paid inclusion service in March that charged each time a listing was clicked.
MSN followed suit this month when it unveiled a new look to its search pages. A longtime user of paid inclusion pioneer LookSmart, MSN removed all paid inclusion from the search engine, including Site Match listings provided through its use of Yahoo’s Web search technology.
Yahoo remains committed to its 6-month-old Site Match paid inclusion program. When it debuted the program, Yahoo executives explained that it would address the problem of search spiders not reaching all the Web’s content.
As a companion to the paid program, Yahoo operates the Content Acquisition Program, which lets noncommercial sites feed their Web pages through for free. Yahoo has signed National Public Radio, the Library of Congress, The New York Public Library and others for the Content Acquisition Program.
"We are still committed to the Content Acquisition Program," Yahoo spokeswoman Stephanie Ichinose said. "We continue to work with content providers to consider ways to evolve and improve the program."
Nate Elliott, a Jupiter Research analyst, said paid inclusion still has a bright future because search engines simply cannot refresh their indexes quickly enough to offer the best possible search results. Jupiter expects paid inclusion spending to reach at least $200 million next year.
When it dropped Site Match from its listings, MSN did not rule out returning to some form of paid inclusion, including through Yahoo, as long as it is clear to users which listings are paid and the index is improved.
"I wouldn’t be surprised to see MSN back in the [paid] inclusion game," Elliott said. "They clearly don’t have any philosophical problem with it."
Fredrick Marckini, CEO of Arlington, MA, search marketing firm iProspect, said most of his clients use Site Match, benefiting from the guarantee that Yahoo will crawl their sites every 48 hours. Since iProspect estimates up to 70 percent of all clicks occur in the algorithmic search results, Site Match has been useful, he said.
"Without Site Match, you’re never assured that more than 50 percent of the Web site will be included in the index," he said.
Critics contend Site Match gives the appearance that Yahoo favors paid inclusion listings over non-paid, since it charges a fee each time a paid inclusion listing gets clicked. Marckini does not think Yahoo gives Site Match listings favorable placement, but a submitted listing is easier for Yahoo’s search algorithm to consider than a crawled Web page, giving a paid inclusion Web page a de facto boost.
Jim Lanzone, vice president of product management at Ask Jeeves, said the search engine found combining structured content of paid inclusion feeds with unstructured content of Web search like mixing "apples and oranges."
"We found that it affected relevance," he said. "Sometimes that would be positive, but that was an accident. More often than not it was negative."
The Federal Trade Commission two years ago issued guidelines for paid inclusion, recommending that search engines "clearly and conspicuously" disclose that some sites paid to have their Web pages included in the index. Yahoo provides that disclosure under an "about this page" link at the top of its search results page.
Danny Sullivan, the editor of Search Engine Watch, an industry Web site, has criticized Site Match for not disclosing which listings paid to be included in the index.
"I don’t like the way it’s currently offered on Yahoo," he said. "It goes against how Web search is traditionally supposed to operate."
The greatest concern for Yahoo could be Site Match affecting its standing as a search engine. It ranks behind Google in search share, drawing 30 percent to Google’s 36 percent, according to comScore Media Metrix. MSN ranks third with 16 percent of searches.
"The only way this could really hurt them is if consumers dislike Yahoo because it uses [paid] inclusion," Elliott said. "But consumers don’t know it’s happening."
Source: DM News
Google has finally decided to be listed on NASDAQ, instead of the New York stock exchange for its upcoming $2.7 billion IPO.
Google's statement is part of a regulatory SEC filing done on Monday. The Mountain View, Calif.-based search company, which filed to go public in late April, had not previously disclosed information on its chosen stock exchange, and it has yet to propose a trading symbol.
Google's filing with the U.S. Securities and Exchange Commission indicates the end of a duel between the Nasdaq and the New York Stock Exchange, staunch rivals that were clamoring to host the technology IPO, one of the most widely anticipated this year.
Stock exchanges not only collect healthy fees from registrants, they gain renown from the clout of their listed companies. The Nasdaq is largely known for its technology constituency, which has been battered by a slump of late. Having Google on board could lift its stature.
"Google is an outstanding company with a great management team, and we wish the company well with its initial public offering," the NYSE said in a statement Monday. The Nasdaq could not immediately be reached for comment.
Google filed with the SEC on April 29 to raise about $2.7 billion in a stock sale later this year. Google's lead underwriters are Morgan Stanley and Credit Suisse First Boston.
In May, the search company named 26 additional bankers, including Goldman Sachs, J.P. Morgan Chase and Lehman Brothers. It has removed Merrill Lynch from the list.
The search company plans to sell shares via an open auction process, in hopes of leveling the playing field for smaller investors.
Typically, institutional investors run the show in an IPO, setting the share price of an offered stock and allocating shares to parties of their choice. Google's IPO is designed to allow interested investors to bid for shares at the price they're willing to pay, and the highest bid wins.
No date has been set for the stock offering. Investors will need to have an account with one of the underwriters.
Source: C-Net News
Google offered more warnings again on any would-be investors who might be getting overly excited, as they wait to buy Google's IPO.
In a financial document filed with the Securities and Exchange Commission, Google emphasized again that its shares are at high risk of dropping in value right after the deal -- rather than soaring, as some did during the Internet bubble.
That's largely because of the unusual way Google is setting the price for its initial public offering of stock, or IPO.
Google's latest financial documents gave investors more details about risks that could make buying Google stock a losing proposition, either in the short run or in the long run.
Those risks, according to Google, include nebulous ones, such as the risk that ``corporate culture'' could change, or more specific risks like spammers who could damage Google's prized search results.
Google also beefed up the section of the document that spells out how Google's unusual plan for its IPO, using an auction style of bidding for stock, poses risks for unwary investors.
Under the auction, investors will bid for Google shares, indicating how many they want, and at what price. Google will generally award shares to the highest bidders. After looking over the array of bids, Google and its bankers will set a single price that all winning bidders will pay.
But under this method, Google warned, overenthusiastic small investors might run up the IPO price to unreasonable levels, driving away larger investors like mutual funds or pension managers. That would make it more likely that Google's stock will fall once it starts trading, Google warned.
``Successful bidders should not expect to sell our shares for a profit shortly after our Class A common stock begins trading,'' Google said.
Experts say the SEC, which is currently reviewing Google's financial documents to make sure they are complete, may be worried that small investors are having visions of huge, bubble-era first-day profits from Google's IPO. So SEC lawyers could be asking Google to spell out the risks very clearly.
Google's executives also noted that if, as expected, they decide during the deal to sell extra shares, the stock will be more likely to fall rather than rise after the deal.
Separately Wednesday, Google found itself facing a trademark complaint by the owners of a children's Web site called Googles.com.
Stelor Productions, which owns and operates Googles.com, said it started trademark proceedings with the U.S. Patent and Trademark Office against Google for infringement of its brand name.
The original creator of Googles trademarked the name in 1997, the year before Google incorporated as a company. Google had no comment on the complaint.
Source: Mercury News
Merrill Lynch dropped out of the list of underwriters taking part in the upcoming initial public offering of Google, mostly out of concern that the fees it would generate wouldn't be worth it.
Early Monday, Google, the Internet search engine based in Mountain View, California, disclosed that Merrill Lynch wouldn't be one of the firms that would allow clients to bid for shares in Google's initial public offering, which is being led by Morgan Stanley and Credit Suisse First Boston.
It was Merrill Lynch that decided to take a pass, according to people familiar with the syndicate put together to sell the shares, because of the amount of money Merrill Lynch stood to take in from customers who were awarded allocations.
"The fees are too thin," said one institutional investor who is a client of Merrill Lynch and other firms planning to sell shares in the deal. "It wasn't worth the trouble."
A Merrill Lynch spokeswoman declined comment. Underwriters who don't get the coveted lead role in an IPO often settle for far less in fees than other banks. Typically, companies going public pay about 7 percent of the size of the offering in fees, and most of that goes to the lead underwriters. Other firms in the syndicate of banks get less in fees, but also distribute fewer shares.
Google's IPO, though, is anything but conventional. The company has insisted on an auction-style sale for its shares, and, though fees haven't been disclosed, they're likely to be low even for the lead underwriters, let alone those lower down the list of bankers. Instead of a 7 percent fee, some bankers believe the total fee could be around 3 percent.
What's more, other firms involved in the deal could, in theory, handle the sale of more shares than the lead underwriters if a lower-level firm's clients bid at the right price and right size to win shares. That could mean those lower-tier firms are handling more of the risk in placing the shares and paying more of the administrative costs of handling the offering, and getting paid less than other firms.
Source: Taiwan News.com
As Wall Street and some investors gear up for Google's US $ 2.7 billion initial public offering of shares, an obscure group of academics known as auction theorists are already trying to figure out the best way to get a piece of the action.
The internet search engine's plan to go public through an auction has captured the attention of these researchers, who analyse bidding mechanics. That means they anticipate how bidders will behave, how much they are likely to spend and whether winners pay too much.
Legg Mason portfolio manager Bill Miller, who is considering bidding for Google shares, has consulted two such theorists. Even Google consulted one of the best-known auction theorists - essentially odds-makers who analyse the best strategies for making a winning bid.
"I'm becoming very popular," says Matthew Rhodes-Kropf, who specialises in auction theory at Columbia University's business school in New York.
Under the system outlined so far by Google, investors will register with investment banks underwriting the offering, indicating how many shares they want and the price they are willing to pay. Google and its bankers will consider the bids and other factors to determine a "clearing price" at which all of the bids could be sold. Anyone bidding below the clearing price won't get any shares.
Auction theory is related to the serious study of games in which researchers use economics, mathematics and psychology to assess the way people make decisions. And they aren't just finding ways to win at poker: game theory has been used to study financial markets, war strategies and airport-landing fees.
Auction theory is playing a role in big business, too. In 1994, auction theorists from Stanford University in California helped the Federal Communications Commission set up rules for an auction to sell wireless spectrum worth $US20billion. Energy companies have consulted auction theorists when bidding on foreign oil leases. In 1996, Columbia University's William Vickrey won the Nobel Prize in economics for his research on auctions.
Auction theorists find Google intriguing because so many individuals are expected to bid. By pursuing an auction, Google is shunning the traditional IPO model in which professional investors buy most of the newly issued stock.
A pool of bidders that includes professionals and individuals means there is more of a chance some will bid too high, say auction theorists. Furthermore, individuals are unlikely to use the same criteria to analyse Google's value as professional investors, they say. Also there are bound to be different views of Google's value depending on how long the shares will be held.
"It's an unusual situation," says Paul Milgrom, a Stanford auction theorist who recently discussed the process with Google executives. He declined to talk about the meeting, citing a confidentiality agreement.
Like most auctions, one of the biggest risks is what is known as "the winner's curse", an outcome in which a bidder triumphs by overpaying.
"We only have bits of auction theory about how people behave in these situations, so this is a unique opportunity in that sense - it's a $US3 billion experiment," says John Miller, an economics professor at Carnegie Mellon University in Pittsburgh.
Source: F2 Network
Google's auction-style IPO, expected to fetch $2.7 billion this year, will be added to a war chest of $455 million in cash and short-term investments — almost as much as eBay had after its IPO.
With hype in overdrive over Google's imminent stock offering, the latest parlor game in Silicon Valley is guessing how the hottest Internet search engine on Earth will spend the billions raised by its IPO.
What Google does with its newfound loot — it has earmarked $250 million for capital spending, according to its IPO filing — might determine its fate amid increasing competition from Microsoft (MSFT) and Yahoo (YHOO).
Analysts say Google needs to improve and expand its services to maintain its lead in the market for paid search. The market is expected to swell to $4.8 billion in 2005 from $2 billion last year, says Deutsche Bank Securities.
The company could invest in:
New products
Google is expected to spend a higher percentage of its revenue on research and development. Last year, 9.5% of its revenue, or $91.2 million, went to R&D. Yahoo, by comparison, spent 13% of its 2003 revenue.
There is no dearth of ideas at Google Labs, the company's R&D arm. Executives keep a Top 100 priorities list, which today includes more than 240 items. So far, it has produced Gmail, a free service that makes it easier for users to organize and find e-mail; Froogle, a comparison shopping service; and Orkut, a social-networking site.
Google could go in many directions to build on its expertise in online search, says Scott Lundstrom, chief technology officer at AMR Research.
If Gmail is a success, he says, a Google version of instant messager could follow. It could delve into multimedia searches, allowing users to look for video images and sound bites.
Google might also explore fee-based services for businesses to find market research. Such endeavors require heavy investments in powerful Internet servers to keep Google's performance swift.
Or, it could invest in:
Products under development
The company might plow more money into Web Alerts, which deliver e-mail messages daily or weekly on specific content to PCs and cell phones, and Personalized Web Search, where users create a personal profile for results tailored to their interests. Getting those services to market is especially important because Yahoo has already gathered 141 million customer profiles to deliver customized content.
Like eBay, Google might expand abroad with mergers. In its filing, Google says bulking up internationally is crucial to its long-term success. Almost a third of its first-quarter sales came from outside the USA, compared with 26% a year ago.
Another possibility: The investment in or purchase of a Linux desktop company so Google can extend searches to information stored on a PC. Microsoft's pending version of its Windows operating system, code-named Longhorn, would let consumers search Web pages, e-mail and Word documents on their PC hard drive.
"Google might take it further and allow searches over a company's computer network," says analyst Martin Pyykkonen of Janco Partners.
Google had no comment on its spending plans, and its phone-book-thick prospectus is sketchy about business strategy. Google co-founder Larry Page, however, offers platitudes on the evils of Wall Street's preoccupation with short-term profit at the expense of long-term health.
Industry watchers say Google must move quickly to stay ahead of the competition. "Google needs to build on its edge as a search engine," says James Lamberti, vice president of industry solutions at market researcher ComScore Networks. "If it doesn't, Yahoo and Microsoft will swoop in for the kill."
Source: USA Today
Goldman Sachs appears to have angered Google founders Sergey Brin and Larry Page by breaking strict rules laid out to investment banks pitching to lead the flotation.
Goldman Sachs, the Wall Street goliath that prides itself on its close relations with the world's leading businesses, has had a damaging row with Google that may have cost it $100m in fees.
The internet firm that last week announced plans for a $2.7billion flotation shocked many in the investment world when it excluded Goldman as a lead manager for the deal.
In keeping with its aim to be a new kind of company that strives to both make money and be a force for good, Google wanted a float that bypassed the usual backroom deals that favour large investors over the general public.
Goldman chief executive Hank Paulson is understood to have approached Kleiner Perkins, one of Google's biggest investors, to discuss share allocations.
According to US magazine Newsweek, Google was angered that Goldman appeared to be relying on old-style relationship banking, when it wanted innovation. Google chose Morgan Stanley and Credit Suisse First Boston to lead the float, which was seen on Wall Street as a snub to Goldman.
The fees for the deal, one of the biggest technology offerings ever, are put at between $80m to $100m by rival banks.
Goldman declined to comment, though insiders were sanguine about the loss. Sources confirmed that Mr Paulson had placed calls to the search engine's backers through intermediaries but denied this was against rules laid down by Google.
"What the hell is the chief executive supposed to do but make calls?" said one insider. "If that upset the two fruitcakes who run Google, so be it. Maybe they don't like Hank because he's bald."
Goldman has been hinting that it was uncomfortable with Google's desire to hold an internet auction for the shares, a process aimed at forming a company that is owned directly by the public rather than institutions.
The bank is also understood to have questioned whether the computer systems necessary to make the auction run smoothly will work. Rivals dismissed this as carping. "They were gagging to do it," said one banker yesterday.
Google is looking to raise $2.7billion from a float that is likely to value the business at $30billion. This will leave the 15pc stake held by Mr Brin and Mr Page worth about $4billion each.
The two friends famously founded Google in a Silicon Valley garage in 1998. It was devised as a company that would be different to normal corporations, with a more relaxed, less hierarchical atmosphere. It remains somewhat secretive, declining to reveal how many people use its search engine or how its technology works.
"We will not unnecessarily disclose all of our strengths, strategies and intentions," read the filing to the Securities & Exchange Commission outlining plans for the public offering.
Google's first spat with Wall Street came when it made clear it intended to pay the big banks far less for their advice than is usual.
Fees for leading a float typically run to 7pc of the proceeds. In this case the banks are expected to reap around 3pc.
Google has yet to decide where its shares will be listed. The New York Stock Exchange and Nasdaq are likely to fight hard to secure what it likely to be the biggest internet listing.
Source: Business Telegraph.co.uk
