Mutual fund guru eyes Google

Jeremy Pelofsky

BALTIMORE: Legg Mason mutual fund guru Bill Miller, known for huge holdings of technology companies like Amazon.com Inc. said he has his sights on the much-anticipated sale of No. 1 search engine Google.

Miller, who oversees Legg Mason's Value Trust fund, which has outperformed the Standard & Poor's 500 index for 13 straight years, said he has not yet committed to a strategy for the upcoming initial public offering of Google stock.

"I don't know what our answer will be but I have a sense of what that business is worth," he said at a luncheon with reporters at Legg Mason's downtown Baltimore headquarters. "We will bid what we think its worth."

While refusing to reveal his estimate, he said the company was likely worth between $18 billion and $55 billion, the market capitalization of Amazon and eBay Inc. respectively. Legg Mason is the largest outside holder of Amazon and held about $1 billion in shares of eBay and a large chunk of Yahoo Inc.

Google has said it plans to raise $2.7 billion in an IPO but will sell shares through an auction designed to even the playing field for smaller investors and minimize the boom-bust cycles seen with previous, much anticipated technology IPOs.

The planned initial public offering promised to enrich the founders and early backers of the unconventional six-year-old company, which posted revenue of almost $1 billion last year.

It is also expected to set the stage for a new round of competition for Internet advertising dollars with Microsoft Corp. and Yahoo.

Miller said he has assigned a "swat team" to evaluate the value of Google's business, even enlisting an auction theorist to help review it.

"Part of what we're going to do is we're just going to take and model the free cash flows of the business, growth rates and the strategy against eBay, Amazon, InterActiveCorp and Yahoo and see where it comes out," he said.

He noted that Legg Mason's large investments in the other technology companies gave him a solid advantage to fully evaluating the economics of Google and its value.

Separately, Miller said that he was still optimistic about the U.S. economy and the performance of the stock markets, noting that production and inflation were at good levels. He also said the market had already priced in interest rate hikes expected later this year.

"This should be a good year for equities," he said. "I'm pretty optimistic about things."

© Reuters