IPO may value Google at $20B

By Elisa Martinuzzi and Brett Cole
Bloomberg News Service

Google Inc., owner of the world's most-used Internet search engine, is planning an initial public offering that may value the company at about $20 billion.

Sergey Brin, co-founder of the closely held company, said at an industry conference in August that the company was considering selling shares to raise money for acquisitions.

The Mountain View, Calif.-based company has started talking to investment bankers about an IPO that would take place by March, and may sell some of the stock on the Internet, the FT reported.

Initial share sales have declined for three straight years, raising $26.2 billion worldwide so far in 2003, less than half the amount in the same period last year, data compiled by Bloomberg show.

A Google IPO probably would be the biggest by an Internet company since Genuity Inc., a now bankrupt data-network operator, sold stock worth $1.9 billion in June 2000.

"The demand is going to be someplace between very good and extraordinary," said Kevin Calabrese, an analyst at Argus Research in New York. "Google is one of the premier names in the Internet."

Goldman Sachs Group Inc., Morgan Stanley and eight other investment banks are in the running to underwrite a $2 billion initial public offering by Google, said a banker competing for the business.

Google may sell a stake of about 10 percent, valuing the company at about $20 billion, said the banker, who spoke on condition of anonymity.

Yahoo! Inc., owner of the most-used group of Internet sites, has a market value of $24.8 billion.

Google, founded by Stanford University students Brin and Larry Page five years ago, is probably profitable, unlike many other Internet companies that sold shares to the public, analysts said.

Richard Fetyko, an analyst at Kaufman Bros. LP in New York, estimated its profit this year at as much as $200 million on sales of $800 million.

Google generates revenue by providing so-called sponsored-search advertising. The service lets businesses pay to have their Web sites listed at the top of the results of Internet searches on topics related to their business. Google places the sponsored results on its own Web site, and on others that contract with it, including Time Warner Inc.'s America Online.