Google rejects convention with online 'float'

The move by the world's most popular internet search engine has ended months of speculation, after the company reached a size that requires it to publicly announce further information about its business.

The 'flotation', which has a rather arbritrary cash target of about $2.7bn (£1.5bn) in cash, will see Google founders Sergey Brin and Larry Page sell off some of the 77 million shares they own in the company via online auction.

The move is hoped to allow 'normal' internet users to be able to gain a stake in the company, or at least compete on a level playing field with institutional and professional investors, with the company's filing to the SEC containing thinly veiled attacks on the previous 'short-term' view taken by investors and companies in the dotcom boom.

The filing fixes a target for the offering of $2.7bn, but also points out that the target has been estimated 'solely for the purposes of computing the amount of the registration fee'. This has been set at just under $350,000.

However, in making the filing, it was forced to reveal the state of its finances for the first time, unveiling a net profit of $105.6m (£60m) last year on revenues of $962m (£544m), up from $347m (£196m) a year before.

Jordan Rohan, an analyst with Schwab Soundview Capital Markets, calculates that in the first quarter of this year, Google had pre-tax profit margins of 59%. "That is extraordinarily profitable," Mr. Rohan said. "Very few companies of any sort reach those levels."

It has also prompted valuations for the entire company ranging anywhere between $25bn and $50bn.

In keeping with Google's culture, the co-founders promised in an "owners manual" for prospective investors that its debut as a public company would not change its culture. In the preface to the manual, they write: "Google is not a conventional company. We do not intend to become one."

They also espouse a 'long-term' view and pledge not to 'smooth' results for short-term gain.

"As a private company, we have concentrated on the long term, and this has served us well. As a public company, we will do the same. In our opinion, outside pressures too often tempt companies to sacrifice long-term opportunities to meet quarterly market expectations. Sometimes this pressure has caused companies to manipulate financial results in order to 'make their quarter.' In Warren Buffett's words, we won't 'smooth' quarterly or annual results: if earnings figures are lumpy when they reach headquarters, they will be lumpy when they reach you."

"Full SEC filing here ":http://www.sec.gov/Archives/edgar/data/1288776/000119312504073639/ds1.htm#toc16167_6

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"www.google.co.uk ":http://www.google.co.uk

"Full SEC filing here ":http://www.sec.gov/Archives/edgar/data/1288776/000119312504073639/ds1.htm#toc16167_6