Google's hot year

Google has come a long way. A year ago today the company made its debut on the Nasdaq at $85 a share. Now, the stock is trading at triple that--close to $280 a share. The search engine has unseated Yahoo to become the favorite, and even has Microsoft on the defensive as it adds more and more features and services to its elegant and simple search engine. Google has 36 percent share of the search market in the United States, followed by Yahoo with 30 percent and Microsoft with 15 percent, according to figures released on Friday by comScore Media Metrix. The online advertising market is booming, driving Google to $1.4 billion in revenue last quarter. Life is good for Google.

And things are going to get even better. On the eve of its one-year IPO anniversary, and with nearly $3 billion in cash and short-term investments on hand already, Google announced plans to raise $4.2 billion by selling 14.2 million shares of common stock on the public market. The company was characteristically guarded about what it plans to do with the money, saying it expects to use it for "general corporate purposes" like capital expenditures. Google said it may also use the proceeds for "acquisitions of complementary businesses" or technologies, but then added that it does not have any significant or "material" merger agreements pending.

That was enough to start up the Wall Street speculation mill. The big bet is that Google will acquire Chinese portal Baidu.com, which went public earlier this month and which Google already owns a small stake in. Such a merger would put some competition on Yahoo, which acquired a 40 percent stake in Chinese Internet auctioneer Alibaba.com last week. Everyone knows Asia--China, in particular--is the growth market.

Some analysts are guessing that Google will go into the telephony area, maybe buying the popular voice over IP provider Skype, or push into wireless. Just last week, the company , and they've also been quietly buying up unused fiber-optic networks and radio spectrum.

Not only has their innovation led to heated competition and better products in the search market, but the success of their IPO and subsequent share price run-up has buoyed the whole search industry. "They've bubbled the entire market," Danny Sullivan, editor of Search Engine Watch, said, pointing to the hyped IPO of Baidu.com, whose shared nearly tripled on the first day of trading.

"That's the Google effect in other places. Right now, people are thinking that anything with search has the magic touch," Sullivan said. "But just because they are involved in search doesn't mean they are going to be money-makers. People are chasing the Google dollars."

 

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