Google Cleared for Takeoff

The SEC gave the long-awaited initial public offering from Google the green light after the close on Wednesday. Google is expected to begin trading under the Nasdaq symbol “GOOG” shortly before noon Eastern Time on Thursday.

The news comes after Google slashed its anticipated price range for the IPO, and shareholders reduced the number of shares they will sell in the offering. Google set an initial price of $85 for its shares, at the low end of the reduced range of $85-$95.

Google and its shareholders will raise about $1.67 billion in the offering, and the company will have a roughly $23 billion market cap, both well below initial targets.

Google’s IPO has been hampered by missteps, such as an ill-timed interview granted to Playboy magazine and millions of shares that the company failed to register with the SEC. Institutional and retail investors were rumored to be lukewarm on the offering because of the high valuation, rumors that were confirmed by Tuesday’s reduction in the size and price of the offering. IPO ambitions are frequently reduced in lackluster markets, but Google’s reduction was above average.

The reduction in price from $108-$135 a share to $85 a share creates an interesting comparison with Yahoo , Google’s closest competitor.

Yahoo trades at 83 times 2004 earnings estimates and 60 times 2005 estimates. Using the estimates of Mark Mahaney of American Technology Research, at $85 a share, Google will trade at 65 times 2004 estimates and just 36 times 2005 estimates.

Google chose a controversial Dutch auction for its IPO in an effort to price the shares fairly and avoid the big first-day pop that traditionally accompanies IPOs. But the method also underscored just how richly valued the stock will be. Even with the lowered price range, analysts from Janco Partners contend that fair value for Google is closer to $76 a share. The method likely also discouraged insitutional investors, who are accustomed to getting an early pop based on the discounted offering price of traditional IPOs.

Investors will finally find out what the market thinks on Thursday.

Also after the close, Intuit and Synopsis beat estimates but warned. Brocade met estimates.

Stocks soared during the day on strong results from Applied Materials and Network Appliance , as traders finally ignored rising oil prices.

The Nasdaq surged 36 to 1831, the S&P 500 gained 13 to 1095, and the Dow rose 110 to 10,083. Volume rose to 1.29 billion shares on the NYSE, and 1.58 billion on the Nasdaq. Advancers led 25-7 on the NYSE, and 22-8 on the Nasdaq. Upside volume was 88% on the NYSE, and 87% on the Nasdaq. New highs-new lows were 76-15 on the NYSE, and 29-65 on the Nasdaq.

Companies reporting earnings got a positive response for a change.

Applied Materials edged higher despite mixed guidance, and Network Appliance surged 13% after beating estimates and raising guidance.

ChipMOS and Niku soared more than 20% each on their earnings news.

Photronics and CNT also gained on their results, and Standard Micro gained despite warning.

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