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Google raises US$2 billion in stock sale

Google Inc, the most-used Internet search engine, raised US$2.07 billion in a stock sale that will bolster cash reserves to fight Yahoo Inc and Microsoft Corp.

The 5.3 million shares were priced at US$389.75 each, Mountain View, California-based Google said in a statement yesterday. Its second stock sale in seven months raised more than its US$1.67 billion initial public offering in August 2004.

Google is raising cash to develop new markets and win a bigger slice of Internet advertising revenue. The stock has gained 32 percent since a September sale of 14.2 million shares at US$295 each. The company is expanding into radio and print ads and is adding products such as Google Finance to compete with Yahoo, the most-visited Web site, and Microsoft's MSN.

"They seized upon an opportunity and they succeeded at pricing a pretty sizable offering," said Scott Kessler, an analyst at Standard & Poor's in New York.

"That's a price that doesn't seem far from what would be considered reasonable," he said.

Shares of Google gained US$1.56 to US$390 at 4pm New York time in NASDAQ Stock Market composite trading. They have more than doubled in the past year.

Google said on March 29 that it planned to sell the shares to meet demand from index funds that track the Standard & Poor's 500 Index. Goldman, Sachs & Co is manager of the sale.

"It's most people's belief that the company doesn't need the money at the moment," said Kessler, who rates the shares "hold" and doesn't own them. "I was surprised they were going to tap into the equity markets to sell stock."

Google is investing more to maintain the advertising sales growth that propelled the stock to a high of US$475.11 in January.

The company spent US$838 million on capital projects last year and in January bought dMarc Broadcasting Inc, a company that places ads on the radio, for as much as US$1.24 billion. It had US$8.03 billion in cash at the end of the fourth quarter.

This month, Google acquired @Last Software Inc, a maker of 3D design software, to improve its satellite mapping program.

The company also purchased Silicon Valley start-up Upstartle, which makes a word processor for the Web.

Google is replacing Burlington Resources Inc, an oil company being acquired by ConocoPhillips, in the Standard & Poor's 500 Index. The move broadens ownership in Google as managers of index funds purchase shares.

Google becomes the highest-priced member of the S&P 500 Index, surpassing Goldman Sachs Group Inc. Funds with more than US$4 trillion track the S&P 500, including about US$1.1 trillion in index funds, according to S&P.

"Google will be more widely held and have a more stable growth path," said Safa Rashtchy, an analyst at Piper Jaffray & Co in Menlo Park, California, in a March 29 interview.
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