Say you're a computer nerd about to land an inheritance in the low single-digit-billion-dollar range. What do you buy? That's more or less the situation at search engine giant Google Inc. right now, say data center and search engine experts around the industry.
The numbers won't be clear until after the IPO goes off and the final share price is determined by a unique Dutch auction process. But many expect Google itself to clear about half of the total estimated IPO proceeds of $3 billion after the insiders get their take (this assumes the IPO goes off, of course). That leaves plenty of cash around to spend for "general corporate purposes," according to the IPO filings.
For arguments sake, let's say Google banks about $1.5 billion for the corporation in the IPO. It's doubtful they'll use it to buy 4.6 billion U.S. stamps (37 cents), 1.35 billion 20-oz. Cokes ($1.25), 73,913 Honda Accords ($23,000), or 6.5 clones of Alex Rodrguez ($252 million for 10 years, with enough left over to sign Jeter for a few seasons). No, Google became King of Searches by being smarter than that.
Google officials declined to comment for this story. Professional investors find the company's recent tight-lipped nature as vexing as we do, as a story in Thursday's Wall Street Journal notes. In fact, the $1.5 billion is anything but a sure thing. But checking around, we learned the obvious: Google will spend liberally on networking gear, servers, and talent, whether it be with profits or fresh IPO funds.
"We currently expect to spend at least $250 million on capital equipment, including information technology infrastructure comprised primarily of production servers and network equipment, to manage our operations during 2004," states the company's SEC Registration Statement (Form S-1) of June 21.