Richard Holway
Why does Google need another $4bn?
We may write about modest growth in the tech sector. We might report on a NASDAQ which is unchanged from the start of the year and roughly back to where it was three and half years ago in Jan 2002. We might write that, as IT is now a "mature" sector, its companies had better act mature too and start paying dividends. We might report on companies having so much cash that the best they can think to do with it is buy their own shares or return it to shareholders.But there has been one company which is as a far from being mature or boring as a rebellious teenager - Google.Not only has it shown phenomenal growth (revenues doubled in Q2), but its shares are already up 3.5 times in the year since their IPO. Then, on Friday, Google decided to issue an additional 14,159,265 shares (which, as you might expect from a company whose motto is "Do no evil", just happens to be the numbers after the decimal point in the value of Pi) raising $4bn. As Google already has $3bn in its coffers, it hardly needs this cash for its current business. Comment: So what is Google planning? The weekend press has had a field day suggesting takeover candidates. Suggestions include EuroNext-listed Trader Classified Media (owner of 575 magazines), buying PayPal to provide a "Google Wallet", and increasing its stake in Baidu.com - the "Chinese Google" (which managed a 350% rise in its share price on the first day of its IPO a couple of weeks back).A month back Google bought a US wireless start up, Android, for an undisclosed sum. Android makes software for location-sensitive wireless devices. Maybe this is the area where we will see additional investment? Many see this as the next "killer app". It also invested in Current Communications, which provides Internet access over powerlines. Google has been rumoured to be planning to build a global fibre-optic network from scratch. Well, that would cost a few billion dollars.But the suggestion which appealed to me most was to buy London-based Skype. Skype already has over 50m users for its VoIP telephone service. Murdoch's News Corporation was rumoured, a few weeks back, to be interested in Skype with a $3bn price mentioned. So Google is raising funds of the right magnitude. Putting Skype under the Google portal would push Internet telephony into the mainstream overnight. The commercial opportunity could be stunning.
