WASHINGTON, April 26 (UPI) -- Famous Internet search engine Google waited out the dot.com crash, but now the waiting for the world's most popular search engine may be over as the company is widely expected to announce this week that it will hold an initial public offering which may value Google Inc. for up to a whopping $25 billion.
According to a media report, the Mountain View, Calif.-based search engine has picked several investment bankers to handle the company's IPO. The Wall Street Journal reported Monday that Google had picked Credit Suisse First Boston and Morgan Stanley to handle what may well be one of the largest securities offerings in history.
The Journal cited sources close to the deal.
If the Google IPO is a big hit on Wall Street it will signal potentially favorable conditions for other Net and tech-related IPOs as well.
"The Google IPO has moved from speculation to serious. The current estimates of enterprise value are north of $20 million. If that value structures holds, it will be not only of great benefit for Google but also for the securities markets as a whole because of the confidence it displays in technology and the economy," said Joel M. Bernstein, a partner in Los Angeles-based law firm McDermott, Will & Emery.
"It is easier to feel that confidence post-bubble burst when you have a company that has been successful for six years as opposed to six hours. Eventually, the valuation will be almost as good for Google's rivals, including Yahoo and Microsoft, when the value of their market segment is enhanced and they are pushed to perform by the new big kid on the block with money in his pockets," he added.
Bernstein specializes in mergers and acquisitions and securities work for McDermott, Will & Emory.
Google had its foundations in a Sanford dorm room and grew quickly. But, unlike many of its tech brothers, it opted not to go public during the dot.com craze, as it was still in its infancy during the waning days of the boom.
And then came the March 2000 tech and Internet stock crash which made the financial climate highly unfavorable for any tech IPOs.
In the meanwhile, the company has busied itself growing in usership and perfecting its business model. At question, is how successful Google has been as an advertising-driven company. Estimates of Google's current revenues range from $500 million to $1 billion a year, according to various analysts. The majority of the company's revenue is advertising-driven.
Net advertising is back up after a marked drop post-2000. The Interactive Advertising Bureau and PricewaterhouseCoopers reports that Internet advertising sales for the final quarter of last year were $2.2 billion, a quarterly record.
Overall, Net ads totaled $7.3 billion last year, a 21 percent jump.
The Net advertising industry is still making up for lost time, however, with last year's total still shy of the 2000 record of $8.08 billion.
Still, Google's IPO comes at a time when Net advertising is on the upswing and has come of age, with proven models demonstrating how to reach the myriad of Netsurfers who use the medium on a daily basis.
In keeping with Google's online business model, the company is expected to run its IPO as a electronic auction, which would reduce the underwriting fees paid to any respective investment bank handling the IPO and make for a level playing field for any potential issue buyers who could bid on shares directly. While such an online auction of shares would not be a first, this would be the largest.
Currently a privately held company, Google's major funding partners include the investment firms of Kleiner Perkins Caufield & Byers and Sequoia Capital. Other investors include Stanford University; Andy Bechtolsheim, co-founder of Sun Microsystems and current vice president at Cisco Systems; and Ram Shriram, who has held the positions of president of Junglee and vice president of Business Development at Amazon.com.
Started six years ago by two enterprising Stanford students -- the same school which brought the world Yahoo -- Google quickly gained in the search ranks by virtue of its "page ranking" system which often made for more successful and accurate searches. Founders Ph.D computer science candidates Sergey Brin and Larry Page formulated the page ranking algorithm while still in school, surmising, among other factors, that pages which linked to more often (more popular) were greater sources of information.
Danny Sullivan, the editor and publisher of the searchenginewatch.com Web site, told UPI in a previous interview how Google quickly advanced over fellow search engines.
"Google was fortunate to come along with a better system of producing search results at a time when its competitors were getting lost in the morass of being portals. They forgot that quality search was something visitors wanted. It gave Google an opportunity, and searchers have since flocked to it," Sullivan told UPI. "Today, now that its competitors have learned how much revenue search can produce, they've greatly improved. Google is still the market leader, but it's competition is much closer."
According to company history, Page's Stanford dorm room becomes Google's data center while Brin's room served as the business office. The two students put their studies on hold, raised $1 million in funding from family, friends, and angel investors to start the company.
On Sept. 7, 1998 Google was incorporated and moved to its first office in a friend's Menlo Park, Calif. garage with four employees. Initially, Google answered an average of 10,000 search queries per day. Also in 1998, PC Magazine included Google, which was still in its "beta," testing phase in the list of Top 100 Web Sites and Search Engines for that year. At the time of its launch, Google faced such large-scale competitors as AltaVista and Yahoo (also started at Stanford by Brin-and-Page friend David Filos) both of which already had millions of users.
Since its launching, Google has grown to host an estimated 250 million searches daily, according to the searchenginewatch.com Web site.
The search engine has worked its way into popular vernacular with the verb "to Google" someone, meaning to look up their background information. Particularly on the dating scene, "to Google" has proved a popular facet of the dating ritual.
Portfolio manger Barry Randall, tech fund manager at US Bancorp Asset Management, said, "The company has a hot deal on its hands."
(Reported with Leah Krauss and Antonie Boessenkool.)
