Google Sets IPO Pricing

It appears that Google has set their IPO price - 108$ - 135$ per share. Yowza. A reminder that this is done through the Dutch Auction ^? process, which makes that pricing even more...uh...interesting.

Probably worth it though....

[BWJones]

Wow, this kinda reminds me of the Palm IPO pricing bit, where when I found out about the price per share, I lost complete interest in purchasing any and told my broker to not purchase. (boy am I glad about that). However, this is a different matter in that the search engine is in just the beginning of its time here while the Palm IPO was what.....8 years after the Newton was released? Also, even though I am a fan of the Palm Pilot, Palm has had no real innovation going on for quite a while (it would be nice if Apple had released their PDA to force folks to innovate a little more). While Google on the other hand is still running their company like they are actually interested in innovating and are forcing a number of fairly sizable companies to innovate to keep up which is always good for the consumer. This is a company that I will be interested in investing in even at $108-$135/share.

Web index as revenue generator

[manmanic]

I think it's a fair price. It reflects the money Google will make in future from selling access to their web index and associated technology [google.com] - a market that they haven't even begun to seriously develop. The Internet is going to be around for ever, and its content is going to keep growing exponentially until this scary vision [bizreport.com] is fulfilled. Google's search results represent (to date) the best attempt to organize this information in an intuitive user-centric way.

In fact, they already provide programmatic access to their results via the Web APIs [google.com], spawning services ranging from a recipe generator [researchbuzz.org] to a site for detecting online plagiarism [copyscape.com]. According to this story [theregister.co.uk], the developers of Google Alert [googlealert.com], one well-known APIs application, have recently been granted permission to commercialize their service. My guess is that it won't be long before there are many more 3rd party Google applications, bringing in a lot of new money to Google's coffers. Anyone for a BUY rating?

Investors or the public?

[garcia]

It's the end of the world as we know it.
It's the end of the world as we know it.
It's the end of the world as we know it and I don't feel fine...fine...

While I love the idea of Google raising money for its business I am still keeping my fingers crossed that they can remain faithful to their customers rather than the random whims of their investors.

A bit steep for my tastes

[Anonymous Coward]

Seeing as Google is everyones darling child now, and they have had much coverage over their cool technologies and decent methods of doing business, it looks to me like a bad buy. In other words, the price can only go down.

IANAstockbroker, and i have no money to buy stock anyway.

Re:Probably worth it though....

[Sc00ter]

"However, this is a different matter in that the search engine is in just the beginning of its time here while the Palm IPO was what.....8 years after the Newton was released?" I don't know about you, but I remember using search engines in '94, that was 10 years ago.

Share price is irrelevant

[gorbachev]

The price of a share is irrelevant. What is relevant is how much of the company you get for buying the share, and how much the total value of the company in question is.

All other things being equal, 10% ownership priced at $100 is a somewhat of a better deal than .00001% ownership priced at $100.

Safe investment?

[Turn-X Alphonse]

can anyone not see Google doing extremely well in the near future? They maybe expensive but for the next say 5 years they will rise in value and be a pretty safe bet... but after that I dunno, Google is doing evetyhing now but will it still in the future or will it pull a microsoft and go "We're at the top, hello minions do as we say"

Re:Web index as revenue generator

[markkellman]

I'd probably give it a cautious BUY...

I think there will be some serious hype-driven bubble inflation during and immediately following the IPO. They may take measures to prevent it, such as selling more stock, but once the shares are out on the open market, ther'es not much that can be done.

The third-party stuff does look pretty promising though...

Re:Investors or the public?

[Dr. Bent]

I am still keeping my fingers crossed that they can remain faithful to their customers

Oh, you mean the people who advertise on google? Yeah, I think they'll do a good job of keeping those people happy. But people who use google's search engine just to find stuff are not customers...they're the product. Google main business is not selling search results, it's selling eyeballs. Just like any other media company (television, radio, etc...) who's job is to sell advertising, google's customers are the people who pay for advertising. When you start paying google to do a search, then you'll be a google customer...until you're the product.

Re:Web index as revenue generator

[SilentChris]

"I think it's a fair price."

Any investment analyst will tell you that it's far better to have numerous low-priced shared than a few high-priced ones. At this price, a moderate investment (let's say $10,000) gets you only about 100 shares. That means you're completely at the mercy of the stock price (which we know to be oh-so-stable in the tech industry).

No, what'll be interesting is to see what mutual funds grab onto Google as part of their portfolio, and at what percentage. We know it's "risky", but is it considered growth? What percentage will make sense in a mutual fund? 5%? 25%? Those are the questions I'd like to see answered.

Re:Dutch auction: bids start high and go down

[Anonymous Coward]

The dutch auction is over. The price per share is already set. Anything that happens after their IPO is just the free market in action.

Re:Web index as revenue generator

[SunPin]

The Internet is going to be around for ever

Isn't that what they said about the Titanic? Hubris has a dramatic way of destroying things. Google could suffer the same fate at this asking price. Pets.com seemed like a really cool investment in its day. Same goes for Dr. "kung fu" Koop.com.

The Internet itself will die soon for a variety of reasons (spam, peak oil, Super bugs, the Apocalypse). Just don't be disappointed when it happens.

Question

[AdamHaun]

What difference does the price of the stock actually make? Isn't $1000 of Google the same regardless of how it's divided up?

Re:Web index as revenue generator

[Jahf]

We already know that Google has been in spats in the past for indexing protected sites and providing ways to get around them.

I think if I were running such a site I would see about creating a system whereby if I saw Google coming in I would give it 25% of the content (which means the majority of the keywords needed for good indexing will have been sent out) along with a "please click here for more" link.

I personally don't -like- that kind of stuff, but that is not my point ... such services are missing out when they completely block Google from indexing them.

Besides, how many -useful- sites protect there content? I'd say that they are in the small minority today.

Re:Probably worth it though....

[GoofyBoy]

The search market engine really hasn't made impressive leaps.

1. Type in keywords
2. Get list of pages which are relevent.

Step 1 hasn't changed in a long time.
Step 2 is more like a battle against spam. How to avoid misleading (intentional or unintentional) pages.

What makes Google interesting is that it had really nice clean hits. Better than others. Now, due to popularity, its getting worse and worse.

Not much innovation recently.

Re:Web index as revenue generator

[Jahf]

Take a look at the past ... Cobalt, VA, Red Hat all skyrocketed to this price level after their IPO. The only people who got the opening price were friends of brokers and the companies didn't see anything past the opening price. Yet they still changed hands readily throughout the day at those prices.

I don't think there is any question that all the shares will sell. If they don't change hands after selling, Google isn't going to care as they will still have raked in billions with this price instead of hundreds of millions with a lower price.

Is it actually giving anyone a -break-? No ... this price is no more friendly to the casual buyer than those other IPOs (well, not true, a couple of those went far past the $135 mark on first day so it is a boon there). But it is no less friendly to that investor either.

The difference is the brokers and their friends don't get an immediate cash-cow, they're on the same playing field. If I can't get a break, at least I know that the rich dudes didn't either.

PE (Price/Earnings ratio) is the number to look at

[gtoomey]

With second quarter earning of $78M, and a projected market cap of $36B, the PE is 36000/(78*4)=115.

With a PE of 115 Google is an expensive stock & I guarantee Warren Buffet won't be buying at the price. By comparison banking stocks have PEs generally under 20.

Analysts (and I use the term loosely) try to spin these high PEs by claiming there will be high growth, and using Price Earnings Growth (PEG) models.

I won't be buying at that price.

Re:Probably worth it though....

[Beryllium Sphere(tm)]

>software and the internet are clearly much more fictionless industries then automotive

I never thought of the software industry as particularly fictionless...

Re:Safe investment?

[Erwos]

I can think of any number of reasons Google would get hurt:
1. Someone finds a way to circumvent PageRank easily and reliably, basically nuking Google's worth as a search engine. Unlikely, but it could happen.
2. Yahoo or Microsoft come up with a better search technology. Not all the brilliant people in the world work for Google.
3. Gmail roll-out gets flubbed. Google's core expertise is not in making _consumers_ pay for things. This probably wouldn't hurt Google terribly, but stock price would go down (lack of confidence).
4. Something bad comes of the Orkut case.
5. Google gets sued for violating some odd software patent (or, "gets SCO'd", as I like to think of it), or just lands in regular legal trouble.
6. Bad management decisions (remember Aureal? Top of the world on sound cards, got killed by bad management)

I'm not asking people to chime in and tell me how TOTALLY UNLIKELY all this stuff is. It's just that I think it's foolish to believe Google is infallible. Just like every other company, they've got risk.

-Erwos

Mod parent up

[coyote_oww]

This is the only post I've seen with anything close to the information needed to make a purchase/no purchase decision.

Re:PE (Price/Earnings ratio) is the number to look

[fupeg]

The low end of their IPO price ($108) would have their PE at :

$36.25B * 108/135 * 1/(4*79.1M) = 91.6

Still pretty high. Comparing to banking stocks is silly though, since Google is not a bank. Comparing to other internet stocks is more informative. Yahoo trades at a PE of 110. Ebay trades at a PE of 78. Amazon trades at a PE of 60.

Google's price-to-sales ratio (@ $108/share) would be 10.35. This is lower than Yahoo's 14.35, eBay's 18.20, though much lower than Amazon's 2.71.

Google will be an expensive stock, but certainly in-line with other internet stocks.

Re:Web index as revenue generator

[julesh]

Actually, the Titanic cut a fairly serious corner -- they didn't have enough lifeboats for all the passengers.

That's a biggy.

Re:Web index as revenue generator

[ChrisN79]

Any investment analyst will tell you that it's far better to have numerous low-priced shared than a few high-priced ones

It depends on what your goal is. There is one huge advantage to a high stock price -- it cuts down dramatically on the "day trader effect." It is more difficult for people to cause a day-to-day volatility in the stock when the price is high. However for a Google it probably doesn't matter that much since volatility will be fairly high anyways.

Re:Probably worth it though....

[jrockway]

Yup, I my first Hotmail account had 1 gig of storage and an interface different from every other mail client in existence.

I've always had a full archive of searchable usenet posts.

Product search? Psh we had that in 1991!

Basically, google is a lot more than a damn good web search. It also searches products, news, usenet, and my email! That _is_ innovation.

Meaningless Valuation

[Frobozz0]

I'm sorry, were you talking about people's fixation on stock price, horsepower, or MHz? :-)

The world is filled with meaningless measurements that are usually pushed by those that benefit from everyone else's ignorance.

Sad, but true.

Re:Probably worth it though....

[Zevon 2000]

12 divided by 135 is 10.5? Not quite...you've mixed up your numerator and denominator. P/E is just price per share divided by earnings per share, not earnings divided by price times 100. I think 12 is probably too high for earnings per share anyway, but I'm not sure. So right idea, but the result is a P/E of more like 100, which is absurdly high unless you assume very good growth prospects. That is, if you think future earnings will justify the current price then you'd still be willing to pay the current price, and many analysts think exactly that. But Google isn't going to be cheap by any measure, and I think there are probably more attractive investments. Actually, since this is /. I think I should emphasize that if you work in tech you should invest outside of tech. Otherwise all of you eggs are in the technology basket and a bad turn could ruin you--something many of us no doubt already found out during the previous tech bust. But the lesson is to diversify. Don't make the stock of the company you work for your major investment, and try to avoid even the industry if you can. Look at what happened to Enron workers if you still don't believe me.