Google to raise US$4bn from stock sale

19 Aug 2005

One year after its titanic flotation search engine giant Google is planning to offer another 14.2 million shares valued at around US$4bn.

It is understood the decision to raise the cash is being driven by heated competition in the internet search world, especially against competitors such as Yahoo! and Microsoft.

Google has said it plans to use the proceeds for “general corporate purposes”, including possible acquisitions. Its stock price has more than tripled since it floated on Nasdaq in August last year with an initial price of US$85. Yesterday its stock closed at US$279.99.

The company’s financial performance has mirrored the gain in its stock price. According to its most recent quarterly report, the Google’s earnings quadrupled to US$342.9m while revenue doubled to US$1.38bn.

For all of 2004, Google earned US$399m or US$1.46 per share and had a revenue of US$3.19bn. The company has massive cash reserves of some US$2.95bn.

But in its Securities and Exchange Commission filing, Google issued a word of caution regarding future growth as the company matures and competition increases. “We expect our revenue growth rate will decline over time and anticipate there will be downward pressure on our operating margin. We experienced both of these trends in the three months ended June 30,” Google said in its SEC filing. “Our revenue growth rate will generally decline as a result of increasing competition and the inevitable decline in growth rates as our revenues increase to higher levels.”

By John Kennedy