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Tuesday, October 28, 2003
Banks jostle for Google IPO
10 of them are in the running
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 Inc., a banker competing for the business said yesterday.
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. Other potential underwriters include Credit Suisse First Boston, J.P. Morgan Chase & Co. and Thomas Weisel Partners LLC. Google reduced the list of banks from 15.
Bankers "have been trying to get that business for a long time," said William Tai, a general partner of Charles River Ventures, a firm that invests in Internet companies. "People call on them. They never have to pitch anybody."
Google probably is profitable, unlike most of the Internet companies that sold shares during the 1990s boom, according to Eric Martinuzzi, an analyst at Craig-Hallum Capital Group in Minneapolis. The IPO may be the biggest since CIT Group Inc.'s $4.87 billion sale in July 2002 and may rival Genuity Inc.'s June 2000 $1.9 billion sale as the largest U.S. Internet IPO ever.
The company, based in Mountain View, Calif., may have revenue of about $1 billion in 2003 and net income of about $200 million, Martinuzzi said. He said the paid-search Internet market may grow 50 percent to 60 percent next year, boosting the company's revenue in 2004 to about $1.5 billion and net income to about $300 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 America Online.
Google spokesman David Krane declined to comment on the company's financial status or about a potential IPO. He said Google generates "the bulk" of its revenue from sponsored-search advertising. The company also licenses its technology for generating search results that don't include advertising.
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