Google says goal to build $100 billion company

Eric Auchard and Paul Thomasch

NEW YORK (Reuters) - Web search leader Google Inc. aims to become a $100 billion company and plans to put computer systems and other investments in place to help reach that scale during 2006, executives said on Thursday.

"I'll leave it to you to judge whether that is $100 billion in market capitalization or revenue," Google Chief Executive Eric Schmidt coyly said as he outlined his 2006 priorities to Wall Street analysts at the annual Google Analyst Day meeting.

As of Wednesday, Google's market capitalization was already more than $100 billion, at $111.5 billion. For all of 2005, Google had revenue of $6.14 billion, up 92.5 percent from 2004's $3.19 billion.

Three quarters of the way through a four-hour presentation, Google executives were relentlessly positive in detailing the company's plans. They provided no further clues to comments by Chief Financial Officer George Reyes at an investor meeting earlier this week that Google growth is bound to slow, which sparked a sharp sell-off in its stock.

Google shares closed up $11.65, or 3.2 percent, to $376.45 on Nasdaq. The stock has recovered from a low below $340 earlier this week but it remains 20 percent off its high of $475 earlier this year.

Its shares have been battered over the past month on fears that Google may find it tough to diversify beyond its pay-per-click advertising business even as it needs to step up investments in order to fend off increasingly focused rivals.

Schmidt underscored the company's emphasis was on long-term growth and has no plans to alter its policy of refusing to set short-term financial targets.

"We are running the company under the philosophy and principles that are written in that initial founder's letter. We're going to continue running the company under those principles," Schmidt said.

Executives at the meeting sought to answer some of the dozens of questions analysts have posed in recent research reports as they seek to value the company.

On Wednesday, UBS Analyst Ben Schachter published a list of 23 questions he hoped Google would answer, ranging from how to model its future financial performance to revenue prospects for new mobile, video, classified advertising and other services.

"It looks to us like international growth is very strong and likely to remain so for a very long time," Schmidt said.

He denied that advertising pricing for popular keyword searches in Google's industry-leading pay-per-click system had weakened in recent months, as some analysts have speculated.

Google derives more than 97 percent of its revenue from search-related advertising.

"It does not look like any specific segment has topped out," Schmidt said, adding that he saw significant pricing power "to the upside" -- in other words the capacity to boost the prices its advertising customers pay.

Schmidt said that Google is looking to expand beyond Web search advertising into other forms of online and offline advertising. Eventually it wants to be able to address advertising to all major media, he said, including radio, mobile phones, video and print.

He downplayed the threat of competition from Microsoft Corp., the world's largest software maker.

"We're primarily focused on Microsoft as a competitor because of their history as a company," Schmidt said, noting that Google had not yet seen an impact from Microsoft's own search products. Marissa Mayer, vice president of search products, added that: "They (Microsoft) will have a hard time competing in that space" given Google's headstart and size.

Jonathan Rosenberg, Google's vice president of products, said the company is probably doing one or two small technology focused acquisitions a week, both to acquire innovative new products and services but also to recruit top engineers.

Rosenberg also warned analysts against focusing on specific products and features and quoted Henry Ford's dictum that: "If I had asked my customers what they wanted they would have said a faster horse."

Google reaches 69 percent of global Internet users, who, on average, are exposed to 128 search ads per month, one executive said. Market research firm ComScore Networks Inc. shows Google with 40 percent of the U.S. market for Web search, and between 60 percent to 80 percent share of most European markets.

The remarks were Webcast. The news media was barred from the meeting with analysts and major investors.