Google auction gets under way

While that creates a chance for investors to get in at the starting price, it also means that they will have to compute the price they want to pay and a number of shares they want based on their view of what Google is worth, no easy task.

Google is expecting its shares to be priced between 108 and 135, which, at the high-end, values the company at 188 times its earnings over the last four quarters, compared with a trailing ratio of just over 100 for close rival Yahoo.

Nearly a dozen investors and analysts who are disclosing their pricing expectations are predicting that Google8217;s shares will be priced between 70 and 115 per share.

8216;8216;As good as paid search is for the time being, our fundamental issue on Google, however, is the need to diversify their revenue beyond paid search which was 98 per cent of revenue in the first half of 2002,8217;8217; said Janco Partners analyst Martin Pyykkonen, who is calling for the shares to be priced at 76.

A steady stream of negative publicity, most recently triggered by an interview in Playboy magazine with Google8217;s founders that may have violated securities laws, has also added to worries over investing in Google.

A source said the SEC would not delay the IPO, widely expected to happen this week.

Google has not said when it will end the auction. 8216;8216;They need to do something about the price of the offering, and lower it to 60 or 70 to broaden their shareholder base and provide some upside to institutional and retail investors,8217;8217; said one Silicon Valley investor who declined to be identified.

In late July, Google issued financial results for the quarter ended in June showing that quarterly revenue growth had slowed to 7 per cent, a sharp contrast to the double-digit gains in every other quarter since 2002. Then the company disclosed that it may have issued more than 23 million shares and 5.6 million stock options illegally, triggering an investigation by California regulators.

Still, analysts said they were confident that the IPO would remain on track and that most people would look beyond the recent spate of bad publicity. 8216;8216;It seems that very few people have very few positive things to say about Google right now,8217;8217; said Standard 038; Poor8217;s Scott Kessler, who is recommending a bid of 110 per share. 8216;8216;But at the end of the day you still have to acknowledge that the company is a leader in an appealing high-growth segment8217;8217;.

8212;Reuters