After 1 Year, A $4 Billion Re-Google

Plans for a 2nd Stock Sale Start Speculation About Acquisitions

Internet powerhouse Google Inc. revealed plans yesterday to raise up to $4.2 billion by selling more shares of stock, capitalizing on huge public interest in the company as it battles for online supremacy with rivals such as Yahoo and Microsoft.

The announcement almost exactly a year after Google's initial public offering surprised analysts. The company's stock began trading on Aug. 19, 2004, at $85 a share and is now worth $279.99 a share, giving Google a total market value more than twice that of General Motors Corp.

Analysts marveled at Google's move, noting that the already-wealthy company may be hoarding cash while hatching big schemes to buy an international company or new products, particularly as its rivalry with its big tech competitors heats up.

"I don't think they needed to do this at all, but the thing about Google is that they're always thinking ahead," said Scott Kessler, an analyst with Standard & Poor's. Google last reported it had nearly $3 billion in cash and cash equivalents -- and combining that with the additional money, it could easily go shopping for ways to augment its popular search tools, he said.

The Mountain View, Calif.-based company went into business in 1998 with a tool to make searching the Internet simpler. Starting with its wildly successful word search, the company ventured into e-mail, satellite-map search, video search, image search and even print-media search.

Google now employs more than 4,000 people and makes nearly all of its income from advertising associated with its search products, which last quarter yielded $342 million in profit. The news of the secondary offering sent the stock down $5.11 yesterday.

In a nod to its offbeat approach, Google set the offering at 14,159,265 shares, a number that matches the eight digits to the right of the decimal point in the mathematical value pi.

"It's not a conventional company," and it must plan for fierce battles against its largest competitors, Yahoo Inc. and Microsoft Corp., both of which have more cash than Google, Kessler said.

In a filing yesterday with the Securities and Exchange Commission, Google underscored that point. Despite its relative youth, Google cast itself as a contender against much larger and more established rivals.

"We face formidable competition in every aspect of our business, and particularly from other companies that seek to connect people with information on the web and provide them with relevant advertising," it said in its filing.

"We expect that Microsoft will increasingly use its financial and engineering resources to compete with us. Both Microsoft and Yahoo have more employees than we do (in Microsoft's case, currently nearly 14 times as many)." With more cash and longer operating histories, both companies "can use their experience and resources against us in a variety of competitive ways, including by making acquisitions, investing more aggressively in research and development and competing more aggressively for advertisers and web sites," it said in the filing.

Company officials declined to comment further about the offering, and in the SEC filing they denied having specific or immediate plans to spend the cash for acquisitions.

But this week, Google rival Yahoo announced its intention to pay $1 billion for a 40 percent stake in Alibaba.com, a Chinese online commerce company. That could inspire Google to invest in a similar Chinese asset, such as search firm Baidu.com Inc., which last week raised money in its own successful public offering, S&P's Kessler said.

Or, Google could seek to acquire or partner with an Internet phone company such as Skype Technologies SA, a computer-based phone service with 47 million free-Internet phone users and 2 million paying subscribers who buy credits to make cheap phone calls over the Web. "Google is about getting people to use as many things as possible, as much as possible, for as long as possible," and a phone-and-messaging service would achieve that, Kessler said.

Google retained Morgan Stanley, Credit Suisse First Boston LLC and Allen & Co. as underwriters for the stock. Although its initial public offering took place in the form of an unconventional auction process, the secondary offering makes no mention of the auction system.