Posted on 08/17/2004 10:46:58 AM PDT by Che Chihuahua
It looked like Google’s stockmarket flotation might be derailed at the last minute by an interview in Playboy magazine that seemed to contravene listing rules. However, the Securities and Exchange Commission has reportedly given it the go-ahead, and the search-engine company could be valued at as much as $36 billion when its shares start trading later this week. Is it worth anything like that?
GOOGLE’S founders, Larry Page and Sergey Brin, have always had an air of niceness about them: after all, Google was the first company to promise “not to be evil” in the prospectus for its initial public offering (IPO). But it appears as if the founders of the world’s biggest internet search engine have a touch of naivety about them too. In April, as they were planning Google’s IPO, they gave an interview to Playboy magazine. Alas, such interviews can fall foul of America’s tight rules on stockmarket flotations, which are designed to prevent companies from hyping their stock ahead of a listing. And so, just as the bidding for the shares got under way on Friday August 13th, it looked like the IPO might have to be pulled.
In the end, it didn’t come to that. The Securities and Exchange Commission, America’s main financial regulator, reportedly gave the IPO the go-ahead after Google refiled its offering document with the Playboy article attached. And so the innovative Dutch auction for the firm's shares is expected to wind up on Wednesday, with investors who bid at or above a market-clearing price paying that price. Google shares are likely to begin trading on the Nasdaq market on Thursday. The company and its bankers have declined to give details of bidding levels, but the Wall Street Journal reported on Monday that most bids are within or above Google’s own estimated range of $108-$135 per share, valuing the company at up to $36 billion.
The Playboy fiasco is simply the latest controversy to befall Google over the past few months. It has already had to offer to buy back shares improperly issued ahead of the flotation. And at the end of July, Google’s website was crippled by an internet worm, MyDoom. Of course, there are many investors with an interest in playing up Google’s problems and talking down its worth, so as to get the shares more cheaply in the Dutch auction. And Wall Street banks, whose lucrative stranglehold on IPOs is threatened, are also keen to prove that companies cannot list without the help of banks in finding buyers for them. But even some supporters of the auction admit that Google’s shares may be wildly overvalued, and that investors may not be taking into account threats to its dominance of the internet-search market.
While Google is the undoubted leader in online searches, with more than a third of the market in June, its profits are still modest: it made $143m after tax in the first half of the year. At the expected valuation, it would be worth a staggering 187 times current earnings. Such a valuation implies a future of rapid growth and high profit margins. But, while most expect Google’s revenues to continue to soar, its ability to make money from such sales is in doubt.
Google makes most of its money from so-called sponsored links—discreet ads that come up with any search—and can do so because of its dominance in search. But that lead is under threat. Until this year, Yahoo!, an internet portal, used Google to power its searches, paying a licence fee for the technology. But Yahoo! has acquired a number of other search engines, and in February cut its ties to Google. Google’s share of all searches has fallen from 75% at its peak to around half, and Yahoo! is not far behind. Moreover, Yahoo! has a key advantage over Google: because of its vast base of registered users (100m people use its e-mail, travel and other services), it is in a better position to tailor searches to users’ needs. Microsoft poses a threat to Google too. The software giant is developing its own search service, and plans to integrate this into its Windows operating software from 2006
Google knows that if it is to stay ahead of Yahoo!, it will have to gather more information about users and make them more loyal to its website. To see off Microsoft requires something bolder: that Google turn its technology into a new operating system that will run over the internet rather than on a desktop, making Windows irrelevant. As a first step in implementing this vision, Google unveiled Gmail, its new e-mail service, in April. This has the advantage of offering huge online storage capacity. The idea is to make money from sending out carefully targeted ads, based on information found in e-mails. But the service is controversial: privacy advocates have accused Google of Big Brother-style snooping.
Gmail is still being tried out, but even if Google can put the privacy row behind it, the prospect of a battle with Microsoft is not enticing. The company behind Windows has long been adept at copying technologies and then crushing the companies that first developed them. It is also awash with cash. Even if Google raises the hoped-for $3 billion from its flotation, it will be small change compared with Microsoft’s war chest.
I read it for the jokes. :^)
> first company to promise “not to be evil”
Is that akin to a more sensitive war on other search engines ?
Fun with scare quotes:
After reading Playboy's "article," I believe that Google's "stock valuation" is artifically enhanced. I mean, those, "earnings statements" don't look natural at all! I've seen real "quarterly statements"--especially when I was in college--and Google's look too good to be true. The "price point" is too firm, for one thing.
More likely, someone at Yahoo.
Who then reported it to the SEC. < |:)~
SAN FRANCISCO (Reuters) - Playboy magazine on Tuesday posted to its Web site an unpublished portion from its interview with Google's founders, which raised regulatory eyebrows not for what it revealed, but for its timing -- just before the Internet search engine's much-anticipated initial public offering.
In the excerpt, which was posted to www.playboy.com on Tuesday, Google co-founder Larry Page talks about Google's management structure.
"We received a lot of interest in the Google interview from readers. We think it is of interest to our readers," a Playboy spokeswoman said.
She added that the section was cut due to space constraints and that no other significant portions of text were left out of the published article, which hit newsstands on Aug. 13.
The original article, which ran in the adult magazine's September issue, prompted the U.S. Securities and Exchange Commission to request additional information about the interview.
While Playboy is known for its provocative interviews with high-profile individuals such as Cuban President Fidel Castro and civil rights leader Malcolm X, the Google piece was not particularly memorable.
Shortly after its publication, Google said in a regulatory filing that its founders' involvement in the article may have violated U.S. securities rules governing its then-pending IPO.
The company declined comment for this article.
Google founders Page and Sergey Brin conducted the interview in April, before the company filed to sell shares to the public.
The flap over the Google founders' Playboy interview came just months after Salesforce.com's chief executive got into hot water for talking to the New York Times during the so-called "quiet period" before his company's IPO.
U.S. securities regulators are currently reviewing quiet period rules.
http://story.news.yahoo.com/news?tmpl=story&ncid=738&e=1&u=/nm/20040824/tc_nm/tech_google_playboy_dc
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