Google's filing for an initial public offering yesterday could provide a boost for other technology companies seeking...
to raise public funds, although the popular search company is by no means ahead of the field with its move to become a listed company.
Google hopes to raise more than $2bn from the sale of its stock. The company's popularity, combined with an almost nostalgic regard for its dotcom business model, caused the move to attract widespread attention among investors and the media.
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," said Jonathan Silver, managing director of Core Capital Partners.
Even 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, said 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 said. "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 publicise their brand, and a way to generate returns for their venture investors. For larger companies such as Google, it can also provide a means to make acquisitions.
Analysts are not execting a rerun of the late 1990s dotcom investment frenzy, but if Google's IPO goes well, it could lure investors back into high tech because it is so well known.
"If we see a situation where those shares jump up, then we're back off to the races," said Fred Siegel, president of portfolio management company The Siegel Group. "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, said 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 said.
"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 will make little difference to the timing of BlueArc's public offering, however. Rattazzi said 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, said the economic climate is not particularly favourable 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.
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, he added.
"Human nature being what it is, people are always looking for a quick buck, and 1999, in terms of some people's investment behaviour, is ancient history," he said.
James Niccolai writes for IDG News Service