The NYT has some insights on Google’s true margins, which were depressed in the S1 due to stock option grants:
Google can behave with so little regard for shareholders’ wishes because its business is so attractive that investors will be clamoring to buy stock no matter what conditions the company sets. The company’s sales and profits are increasing at a spectacular rate, at least for now, and its profit margins appear to be among the highest in corporate America.
In 2003, Google reported an operating profit of $340 million on sales of $960 million. But the 2003 figure appears to understate the company’s cash profit margin, since it includes very high expenses related to stock options that will probably decline in future years. On a cash basis, Google had an operating profit of $570 million in 2003, and an operating margin of 62 percent.
The WSJ, which I won’t link to as it’s sub required, had these tidbits:
The most prominent proponent of IPO auctions has been W.R. Hambrecht & Co., a boutique San Francisco investment bank founded by longtime technology financier William Hambrecht. Google’s filing didn’t mention W.R. Hambrecht, but people familiar with the matter say the firm is likely to be named an additional underwriter in coming weeks. A Hambrecht spokeswoman declined to comment….
…
Despite its size, Google continues to grow like the young company it is. Revenue more than doubled last year. Google said it generated $395 million in cash from operations last year and an additional $204 million in the first quarter of 2004.
The numbers are “stunning,” says Mitchell Kertzman, a venture capitalist with Hummer Winblad Venture Partners in San Francisco. “The question is, how do you sustain that?”…
.. Page and Brin each now own roughly 15% of the company. CEO Eric Schmidt holds a roughly 6% stake. If Google were valued at $25 billion, the founders’ stakes would be worth roughly $4 billion each, and Mr. Schmidt’s stake would be worth about $1.5 billion. In an unusual declaration, Messrs. Page and Brin said in the prospectus that they planned to sell a portion of their holdings as part of the public offering.
Other than the founders, Google’s two biggest shareholders are prominent Silicon Valley venture-capital firms Kleiner Perkins Caufield & Byers and Sequoia Capital, which invested roughly $13 million each in 1999. Each firm now owns slightly more than 10% of the company, meaning their stakes could be valued at $2.5 billion apiece….
When comparing Yahoo and Google one should note that Yahoo reports gross revenues including payments to MSN and other partners, while Google reports net revenues excluding payments to partners.
If both had reported gross revenues, Yahoo’s revenue for 2003 was $1,625 million and Google’s revenue was $1,462 million. Cash flow from operations was 428,1 million for Yahoo and 395,4 for Google. It looks like Google is very close to being the size of Yahoo. The implications on valuation should be interesting.
Re “In an unusual declaration, Messrs. Page and Brin said in the prospectus that they planned to sell a portion of their holdings as part of the public offering” … smells like they’re giving a bit to cover their butts, knowing something pretty obvious – they won’t stay on top forever. It’s interesting to juxtapose this to something I read previously, where they’re quoted as saying “we’re going to do it the way we want to do it.” I guess the guys are too smart for they’re own good. I wouldn’t bank on Google for too long, but I still use it.
I don’t see why they should sell their stock right now. I don’t see it. They have nothing to gain by relaxing control NOW. They should, though, be planning for succession.