updated 8/18/2005 4:01:02 PM ET 2005-08-18T20:01:02

A year after its blockbuster debut as a public company, Google Inc. said Thursday it plans to offer another 14.2 million shares, currently worth about $4 billion, as competition heats up with rivals Yahoo Inc. and Microsoft Corp.

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The Internet search leader said it will use the proceeds for “general corporate purposes,” including possible acquisitions. Google added that it currently has no agreements or commitments to make a material purchase.

Google’s stock price has more than tripled since the August 2004 initial public offering at $85. It fell $5.30, or 1.9 percent, to $279.80 in Thursday trading on the Nasdaq Stock Market.

The secondary offering would raise nearly 2.5 times the $1.67 billion generated by the first IPO.

“The stock is at a nice price and they should be taking some money as a result,” said Mark Stahlman, an analyst at the investment bank Caris & Co.

Google spokesman David Krane declined to comment further on the company’s filing with the Securities and Exchange Commission. “Literally, the document speaks for itself,” he said in an e-mail.

The company’s financial results have mirrored the impressive gains in the stock price.

In its most recently reported quarter, Google’s earnings more than quadrupled to $342.8 million. Revenue doubled to $1.38 million.

In all of 2004, Google earned $399 million, or $1.46 per share, and had revenue of $3.19 billion. As of June 30, the company held $2.95 billion in cash.

Analysts have questioned whether that growth can continue at such a high clip, given the aggressive competition of Yahoo and Microsoft for space on personal computer desktops and advertising dollars. In the past year, Google’s rivals have launched improved search engines, better e-mail systems and a spattering of applications aimed at capturing eyeballs.

In its filing Thursday, Google said it expects its revenue growth rate to decline over time and anticipates “there will be downward pressure on our operating margin.”

But Google has not stood still.

Firm buffs up
It has branched out from Internet search to desktop search, increased storage space in its free e-mail service to more than 2.5 gigabytes and buffed up its local search and map-based services. It also provides a video search tool, a Web browsing accelerator and a shopping comparison site.

Google recently increased its 2005 capital expenditure forecast to more than $700 million from more than $600 million. It also added more than 700 additional employees and said the number is not viewed as an anomaly by the company, which had 4,183 workers at the end of the second quarter.

In a research note released a day before Google’s secondary offering was announced, Merrill Lynch analyst Lauren Fine said that the company’s growing revenues could offset increases in operating expenses but that there could be some downside “should Google not surprise as much as it has in the past.”

The company also has been the subject of countless rumors, including plans to introduce an Internet telephone service. If any turn out to be true, the company could be expected to increase its capital spending even more.

“The mistake here is people think that Google is somehow an advertising company and therefore in the media business. They’re not,” Stahlman said. “They’re in the infrastructure business. There’s a lot of infrastructure that they need to build.”

The latest registration document filed with the SEC is briefer than the paperwork filed in advance of last year’s IPO. It does not state when the secondary offering will take place.

There’s also no folksy letter to potential investors from the company’s founders or mention of the company’s motto of doing no evil. There’s no word on whether Google will again use a Dutch auction that was designed to more fairly distribute initial shares in 2004.

But it does stress Google remains an unconventional company, with a focus on long-term prospects over short-term results. It says investors can forget about dividend payments.   And there’s also some of Google’s trademark quirkiness.

The exact number of shares to be sold — 14,159,265 — happens to be the eight digits beyond the decimal point in the mathematical value Pi. Google’s founders, Sergey Brin and Larry Page, were raised by math teachers and studied computer science at Stanford University.

Following the stock sale, Google will have about 191.1 million class A shares outstanding. Including about 101.7 million class B shares with more voting power — of which 79 percent are held by co-founders Page and Brin, and CEO Eric Schmidt — Google’s outstanding stock will total about 292.8 million shares.

Morgan Stanley & Co. and Credit Suisse First Boston are managing the proposed offering, along with underwriter Allen & Co. The underwriters have the option to purchase up to 600,000 additional class A shares to cover over-allotments.

Google’s filing also cited a potential problem that many companies might like to have.

As it warned in the initial offering last year, Google said the sudden lavish wealth of employees who own stock “has created disparities” in the work force, which could fracture the culture. Or some rich employees might decide there’s no more reason to keep working. Replacing them could be costly or disruptive.

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