Google Files to Sell $4B in Stock

Google Inc. plans to sell another 14.2 million shares, raising about $4 billion, but the search-engine company isn't providing many clues about how it will spend the money.

Some analysts speculated Mountain View-based Google (search) might be devising a bid for the Chinese search firm or the digital video recorder pioneer TiVo Inc. (search) Others suggested the money will help finance an Internet telephony service.

In its filing Thursday with the Securities and Exchange Commission, Google said it will use the proceeds for "general corporate purposes," including acquisitions. It added that it currently has no agreements to make a material purchase.

David Krane, a Google spokesman, declined to comment further on the announcement made one year after its blockbuster initial public offering.

Wall Street analysts filled the void with speculation.

"They have massive infrastructure plans, so I'd say (it may buy) a couple hundred thousand more servers, a bunch of dark fiber, maybe a few data centers," said Mark Stahlman, an analyst at Caris & Co. "Quite possibly wire up half the United States with Wi-Fi or something."

In a research report, Merrill Lynch analyst Lauren Rich Fine noted there was speculation Google might have been interested in buying China's (search) before its public offering earlier this month.

"We have no insight into this, but note that it, in our view, is a good public fit," Fine said, adding that other possible acquisition targets include TiVo and Infospace, another search company.

It's also possible that Google just sees an opportunity to raise some money to bolster its current balance of about $3 billion. Its stock price has more than tripled since the August 2004 IPO that was priced at $85 — well below its original target range of between $108 to $135 a share.

"The stock is at a nice price and they should be taking some money as a result," Stahlman said.

The company's financial results over the past year have mirrored the impressive gains in the stock price despite increased competition from rivals Microsoft Corp. and Yahoo Inc.

In its most recently reported quarter, Google's earnings more than quadrupled to $342.8 million. Revenue doubled to $1.38 billion.

In all of 2004, Google earned $399 million, or $1.46 per share, and had revenue of $3.19 billion. As of June 30, the company held $2.95 billion in cash.

Analysts have questioned whether that growth can continue at such a high clip, given the aggressive competition of Yahoo and Microsoft for space on personal computer desktops and advertising dollars. In the past year, Google's rivals have launched improved search engines, better e-mail systems and a spattering of applications aimed at capturing eyeballs and advertising dollars.

Google has branched out from Internet search to desktop search, increased storage space in its free e-mail service and buffed up its local search and map-based services. It also provides a video search tool, a Web browsing accelerator and a shopping comparison site.

The company also has been the subject of countless rumors, including plans to introduce an Internet telephone service. If any turn out to be true, the company could be expected to increase its capital spending even more.

"The mistake here is people think that Google is somehow an advertising company and therefore in the media business. They're not," Stahlman said. "They're in the infrastructure business. There's a lot of infrastructure that they need to build."

The latest registration document filed with the SEC is briefer than the paperwork filed before last year's IPO. It does not state when the secondary offering will take place.

There's also no folksy letter to potential investors from the company's founders or mention of the company's motto of doing no evil. There's no word on whether Google will again use a Dutch auction that was designed to more fairly distribute initial shares in 2004.

But it does stress Google remains an unconventional company, with a focus on long-term prospects over short-term results. It says investors can forget about dividend payments. And there's also some of Google's trademark quirkiness.

The exact number of shares to be sold — 14,159,265 — happens to be the eight digits beyond the decimal point in the mathematical value Pi. Google's founders, Sergey Brin and Larry Page, were raised by math teachers and studied computer science at Stanford University.

Following the stock sale, Google will have about 191.1 million class A shares outstanding. Including about 101.7 million class B shares with more voting power — of which 79 percent are held by co-founders Page and Brin, and CEO Eric Schmidt — Google's outstanding stock will total about 292.8 million shares.

Morgan Stanley & Co. and Credit Suisse First Boston are managing the proposed offering, along with underwriter Allen & Co. The underwriters have the option to purchase up to 600,000 additional class A shares to cover over-allotments.