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How much is google really worth?
Some reliable sources have said Google will fetch over $25 billion. We all know how much the general internet community rely on this search engine so how many of you would like to have this company sitting in the back pockets of Bill Gates monster MS?
Informed speculation says Google will issue an initial $1 billion of shares, which according to analysts is about one years worth of sales. My contacts on Wall Street have based this mainly on a comparision with successful web giants, Yahoo, Amazon and ebay. Then again other experts say this is too high.
As a point of reference, internet leaders ebay and Yahoo currently command share-proce=to-sales ratios of 19 and 22, respectively. If Google is in fact close to the $1 billion in sales mark, then a $15 to $20 billion valuation is probably a reasonable estimation. according to an oct 24 research note by renaissance Capital. Certain sections of Wall Street have echoed this.
But are these useful benchmarks in attempting to ascertain how much Google is worth? Personally I feel that Overture, Googles head to head competitor in getting companies to pay for search engine listings. Overture is estimated to bring in just under $900 million in revenue for 2003. Each have been growing at a similar rate according to analysts, with Google having a slight edge. For those of you who dont know Yahoo has finalised its acquisition of Overture in early October.
We can also take Verity, the software provides information management products to help companies manipulate and use data in their computer networks. As some of you will know one of Veritys core functions is enterprise search. Google gets anywhere from 10% to 30% of its revenues from providing search to companies or web sites.
So continuing on, these two companies together give a fairly accurate picture of where Google gets its revenue, therefore its valuation would be on a much lower scale than the numbers given by some experts on Wall Street.
Google fails to comment on its figures, but the best estimates given on various leading sites are revenues of $1 billion per year and annual net income of around $100 million.
Skull - Driverheaven.
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