Google IPO sooner than expected

SAN FRANCISCO: Google, the world's No. 1 Web search provider, faces a regulatory deadline that is expected to force the notoriously idiosyncratic company to open its books as soon as next week and could trigger its long-anticipated debut as a public company.

An initial public offering would enrich Google's founders and early venture investors and give it a valuable currency for acquisitions as it takes on determined rivals Yahoo Inc. and Microsoft Corp.

Such a deal, which is widely expected to value the six-year-old firm at about $20 billion, would also generate as much as $100 million in banking fees for Wall Street advisors at a time when the three-year-old drought in IPOs is easing.

But for a company that helps millions of Internet users get answers to any query, Mountain View, California-based Google has been tight-lipped on its plans. Google, which declined comment through a spokeswoman on Friday, could still opt to remain privately held, and nothing definitive has been disclosed about the timing, size or structure of any IPO.

The Wall Street Journal reported on Friday that the company would "push forward with an initial public offering" but provided no further detail. Interest in any Google IPO would be enormous.

"Of course, we are going to look at it. If they do file next week, we'll get a chance to look at their financials," said Ryan Jacob, portfolio manager of the $80 million Jacob Internet Fund.

The brainchild of two Stanford University graduate students -- Sergey Brin and Larry Page, who together hold 30 percent or more of the company -- Google revolutionized Web search in 1998 by offering a simple and powerful way to find information based on the number of links to a page.

Google executives met with bankers last autumn as it began to prepare to sell shares of the company to the public, according to people familiar with those discussions.

In another potential sign of a pending deal, Google's underwriters also have approached owners of companies sold to Google and asked them to preregister their shares, a person familiar with the situation said.

Google derives most of its revenue -- estimated by analysts to be as high as $1 billion -- from search-related advertising.

SEC TRIGGER

The company's sheer size is expected to have tripped a little-known U.S. securities law and that will be force it to open its books and make its IPO intentions clearer soon.

The privately held company, which raised $25 million in venture funding in 1999, is expected to have had well more than 500 equity holders at the end of 2003. Google's own Web site says it has more 1,000 employees, who are eligible for stock options as compensation.

As a result of its ownership structure and assets, Google will be forced to file a Form 10 with the U.S. Securities and Exchange Commission within 120 days after the close of its fiscal year on Dec. 31, experts said.

"A Form 10 is like an IPO, you basically disclose everything about the company," said Brian Lane, former director of the SEC's division of corporation finance and now a securities attorney at the law firm of Gibson, Dunn & Crutcher in Washington, D.C.

Since companies filing a Form 10 are also mandated to report on a quarterly and annual basis, the widely held view in legal and business circles is that it makes almost no sense for Google not to go public.

An IPO would also enrich long-time employees and venture investors -- including top venture firms Kleiner Perkins Caufield & Byers and Sequoia Capital, analysts and venture capitalists said.

But Google's Brin and Page have never been enthusiastic about the prospect of opening up to public scrutiny. People with ties to Google say the company threw itself into doing what it could to delay the seemingly inevitable march toward listing.

And with a company as nonconformist and secretive as Google, there could still be some surprises in store, many observers have said.

"With Google, the world is learning to expect the unexpected," said Gary Morgenthaler, general partner at Morgenthaler Ventures, who has no personal or firm ties to the company.

(Additional reporting by John Poirier in Washington, D.C., Mark McSherry in New York)

© Reuters