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Search giant Google Inc. finally made it official Thursday. It filed the paperwork for its much-anticipated initial public offering that could raise as much as $2.7 billion and is expected to be a bellwether for the technology industry.
Google, of Mountain View, Calif., plans to offer shares of stock through an auction-based process on either the NASDAQ or the New York Stock Exchange, according to its S-1 filing with the Securities and Exchange Commission. Google did not provide a planned stock symbol or a target date for its public listing.
Morgan Stanley & Co. Inc. and Credit Suisse First Boston LLC were named as the underwriters for the IPO.
Along with marking Googles official intent to go public, the filing also provides financial and strategic insight into the company that will be closely analyzed by its competitors such as Yahoo Inc. and Microsoft Corp.s MSN division. As a private company, Google has not had to report sensitive financial data or risks to its business since co-founders Larry Page and Sergey Brin launched it in 1998.
Google revealed that it has been profitable since 2001 and took in revenue nearing $1 billion last year alone. For 2003, Google earned a profit of $105.6 million on revenue of $961.9 million.
Already for calendar year 2004, Google has more than doubled its earnings compared with the same period a year ago. It had earned a net income of $64 million through March 31 on revenues of $389.6 million.
In a joint letter as part of the filing, Page and Brin wrote that while they had always considered taking Google public if it succeeded, the companys rapid growth more recently made a public offering necessary. Google will maintain its three-way leadership structure of Page and Brin as co-presidents and Eric Schmidt as CEO.
“Our growth has reduced some of the advantages of private ownership,” the founders wrote. “By law, certain private companies must report as if they were public companies. The deadline imposed by this requirement accelerated our decision.”
Next Page: Founders say going public wont dissolve Googles unconventional culture.
Keeping the Culture
The pair also wrote that just as they have run Google in unconventional ways as a private company, they plan to maintain that culture as a public company. Googles decision to sell initial shares through an auction process reflects such a desire.
“Many companies have suffered from unreasonable speculation, small initial share float, and boom-bust cycles that hurt them and their investors in the long run,” Page and Brin wrote. “We believe that an auction-based IPO will minimize these problems.”
Speculation of a likely IPO has bombarded Google since last year. All the while, competition in the Web search-engine field has been accelerating. Yahoo Inc. earlier this year dropped Googles Web search results, opting for its own technology. And Microsofts top executives have vowed to aggressively enter the search field with the companys own technology in the next year.
Google cited the increased competition as one of its business risk factors. Also included as a risk was its reliance on advertising as its main source of revenue. It reported that about 95 percent of its net revenues in 2003 came from advertisers.
On the ad side, Google is embroiled in a series of lawsuits challenging the use of trademarks as keywords to trigger its AdWords-sponsored listings alongside search results. Earlier this week, a French insurance company sued Google over trademark issues, joining a closely watched suit from a Michigan home-decorating retailer.
Meanwhile, Google in recent months has been expanding its services while also stirring controversy. It launched a test of its own e-mail service, called Gmail, earlier this month, drawing concerns from privacy advocates because it plans to serve targeted ads based on scanning the contents of messages.
The company, among other things, also has been testing a social-networking service and has launched more local search options, as well as personalization features.