Will Google's IPO Boost Tech Fortunes?
Google's filing for an initial public offering this week could provide a boost for other technology companies seeking to raise public funds. But the popular search company is by no means ahead of the field with its move to become a listed company, industry watchers says.
Google filed papers for its much-anticipated public offering on Thursday, hoping to raise more than $2 billion from the sale of its stock. The company's popularity, combined with an almost nostalgic regard for its dot-com business model, caused the move to attract widespread attention among investors and the media.
In fact, the IPO wagon had already started rolling without Google's help. More than two dozen high-tech companies have filed for public offerings in recent months, including Salesforce.com, Shopping.com, Brightmail, and Lindows.
"The Google filing is certainly good news for the technology sector, because it demonstrates the impressive growth for which technology companies generally have the potential. However, Google's IPO is not driving a revival of the technology sector; that revival is already well under way," writes Jonathan Silver, managing director of Core Capital Partners, in an e-mail response to questions.
Even so, if Google's IPO is as successful as many analysts predict, it could serve as a public statement that would entice investors back to the technology sector and make it easier for other, less well-known companies to follow suit, says Tom Taulli, a finance professor at the University of Southern California and the author of "Investing in IPOs."
"I think the Google IPO will have a positive impact overall on IPOs," Taulli says. "Does it mean a huge surge in the volume of public offerings? I don't think so, but I do think it will lift all boats."
For smaller companies, going public can provide an injection of funds for developing and marketing their products, a chance to publicize their brand, and a way to generate returns for their venture investors. For larger companies like Google, it can also provide a means to make acquisitions.
Analysts don't expect a rerun of the late 1990s, when investors threw money at companies that sometimes had little more than a bright idea. But if Google's IPO goes well, the fact that the company is so well-known could lure investors back into high tech, some analysts say.
"If we see a situation where those shares jump up, then we're back off to the races," says Fred Siegel, president of portfolio management company The Siegel Group, in New Orleans. "I don't think we'll see another bubble any time soon, but it will increase the level of activity. You'll see growing interest in reasonably priced, higher quality IPOs."
For companies doing well in their field, the level of interest is already high, says Gianluca Rattazzi, chairman and CEO of BlueArc, a maker of network attached storage equipment, which hopes to launch an IPO in about a year's time.
"Investment bankers are putting more pressure on companies to go public; we are called on a weekly basis to talk about our IPO plans," he says. "The requirements for going public are being relaxed. Maybe a year ago you needed three quarters of profitability, then it was one quarter. Now, if you can be profitable within a quarter [of going public], that is enough."
Google's IPO won't make any difference to the timing of BlueArc's public offering, however, Rattazzi says. His company is more concerned with being well prepared internally and with the health of the economy in general.
Don DePamphilis, professor of finance at Loyola Marymount University in Los Angeles, says the current economic climate is not particularly favorable for IPOs. The markets are sensitive to risk, they are not climbing as they were in the late 1990s, and interest rates and inflation may be about to rise, he says.
Still, if Google's IPO goes particularly well, it may encourage other companies with "a good story" and "a good niche for their product" to go public, DePamphilis says.
What's more, some investors have short memories.
"Human nature being what it is, people are always looking for a quick buck, and 1999, in terms of some people's investment behavior, is ancient history," he says.