Arabian Business Weekly Update 10th August 2004

Google is about to hit the stock market, but are the shares actually worth buying?

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By  Anil Bhoyrul Published  August 9, 2004

Editorial Leader|~||~||~|

Search for an answer

If you take a take a quick search through Google, some interesting figures quickly come up. The fabulous Emaar Properties, developer of some of the world’s biggest construction projects, is valued at $4 billion. The Saudi Arabian Olayan Group is worth around $6 billion. You could buy a majority share in Formula One racing for roughly $2 billion (and this includes guaranteed television revenues for the next 20 years). But here’s a far more interesting figure. Between them, Emaar, the Olayan Group and Formula One are worth just one third of Google itself. No, I haven’t gone completely mad. I’m just reporting what Google says on its own website. The world’s best-known search engine is preparing for a stock market flotation in the U.S that will value the company at $36 billion. And to be fair to Google, it is only saying so because that’s what the experts are saying. There is a world-wide buzz about Google right now, and many ordinary investors are hoping to acquire shares in the company. Its brilliant branding and ease of use has attracted admirers and investors from across the globe. Personally, I think they should search elsewhere. The craze for Google shares brings back memories of 2000, when any business containing the words dot.com was instantly judged to be worth billions. The figures simply don’t back the Google valuation: advertising spend on search engines this year was $2.5 billion. By 2009 it is forecast to reach $5.5 billion, but the rate of growth will have fallen from 65% to 11%. Google needs to find additional sources of revenue, but its shopping comparison site Froogle is still in the testing stages. Its electronic mail service has yet to catch the public imagination, and rivals such as MSN and Yahoo! are catching up fast. Google is a great company, a great business and has a great management team. But it is not worth $36 billion. Not now, not ever.||**||

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