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False Positives Adventures in Technology, SciFi and Culture from Toronto

Friday, April 30, 2004

Google's Big Adventure

So Google has gone and done their S-1 filing with the SEC. This doesn't mean they will IPO but that they could. They may have been compelled to file due to SEC regulations that require companies to report financial results to the SEC once they have at least $10 million in assets and more than 500 shareholders of record.

Here are a few very worthy summaries of that S- Document : Tristan Louis's TNL.NET , John Battelle's Searchblog and TechDirt's take

A couple of interesting things to note :

  • They are looking to offer shares via auction-based IPO. Which may or may not be a revise dutch auction. Very unusual in the USA, although more common in Europe. This will end run around the lock that the bankers (and their friends) have on getting first gone on the offering, and will also limit the first day bounce on the stock price (a good thing). It will also maximize the amount Googles raises via the offering

  • They had revenue north of $900 million and earning of about $100 million in 2003. They had revenue ~ $300 m and earning of ~100 m in 2002. they would have had earning in line in 2002 save for share based compensation. (given that I exepect that they are planning to IPO) 95% of net revenues in 2003 are from advertisers

  • The "Letter from the Founders" is inspired by Warren Buffett’s essays in his annual reports. Well worth a read, and is indeed readable. No doubt it gave the Lawyers and Bankers ulcers (reason enough!)

  • They are going for a dual stock structure, to ensure they don't lose control

Jon Battelle's point summary would be more usefully if he edited it differently, like this :
1. We don't need to do this for the money;
2. We have no plans to run our business to satisfy Wall Street's need for smooth earnings predictability;
3. We plan to give no earnings guidance, not at least as it's understood on Wall St.;
4. Don't ask us to do so, we'll simply decline the request;
5. We'll do odd things that you won' t understand;
6. We will make big bets on things that may not work out;
7. We run the company as a triumvirate, so there will not be clear leadership from one person like most other companies;
8. We bridge the media and tech industries (interesting), which are in flux, so we've chosen a two-class stock structure similar to the NYT, WashPost, and NYT that helps us avoid being taken over by those forces;
9. We plan using an auction model, as it feels fairer and we understand auctions from AdWords;
10. Don't invest in us if this scares you at all, or the price feels too high;
11. Don't even think about asking us to cut expenses with regard to our employees;
12. We believe in the idea of Don't Be Evil;
13. It's evil to pay for placement or inclusion (a swipe at Yahoo);
14. We hope to bridge the digital divide through Gmail type free services and a foundation with at least 1% of profits and equity to help make the world a better place;
17. Betting on Google is a bet on Sergey and Larry (this was said multiple times, making me wonder if there wasn't some odd future blame being assigned here by the VCs or bankers);
18. This letter is our way of answering the questions we can't answer in the coming months due to the IPO quiet period.

Update: Tirstan done some figuring about How many Google machines : ~50,000 CPU's for around 20 teraflops of processing

and Dan Gillmor reports on GoogleMania: Using Clout, So Far the Right Way , as decent and balanced piece on the impending IPO

For the record here's a PDF of Google S-1 Filing:

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