Google posed for speedy float

INTERNET search engine Google plans to complete its eagerly awaited flotation as soon as this month. The float, likely to raise about $2.7bn (£1.8bn) is being run as a 'Dutch auction' to ensure a level playing field for smaller investors and minimise the chances of it being swamped by speculators eager to make a quick buck.

The company and its team of investment bankers, led by Morgan Stanley and CSFB, have been testing the computer system they will use to run the auction and the timing of the offering depends on successful test results.

Google announced plans for the flotation in April, declaring that it wanted to offer auction shares to the general public. The planned 'Dutch auction' will let investors of any size bid for as few as five shares each – and stock will generally be awarded to the highest bidders.

A large number of stockbrokers, including Charles Schwab, E-Trade, and Ameritrade are likely to be able to offer their clients the shares.

Precisely how the Dutch auction process will work has not been spelled out though City analysts expect details to emerge in the next week or two now that the company has let its views on the timing of the float be known.

Credit rating agency Standard & Poor's estimates that Google could be worth up to $33bn (£17.9bn) once it is floated. But its equity research department warned recently that Google's popularity with web users could prove short-lived if a better alternative came along.

A survey by S&P in the US found that 48% of search engine users say they use Google most overall, compared with 20% for Yahoo, 14% for Microsoft's MSN and 7% for AOL.

But 60% of Google users said they would switch search engines if a better service were introduced.

The survey also had bad news for Google's planned free email service, with fewer than 25% of respondents saying they would be very likely to use it. Google is hoping the service will be one of the products to help diversify its income stream away from advertising revenue associated with its search engine.

The company, which was founded by Stanford graduates Sergey Brin and Larry Page, is also testing a new comparison shopping service called Froogle and is affiliated with a start-up social networking service called Orkut.

But S&P, reflecting on the results of its survey, is sceptical about many of these businesses.

'We believe Google and its shares will also face risks relating to commoditisation of the company's offerings, difficulties related to its introduction of new products and services, and competition from the likes of Yahoo and Microsoft,' said Scott Kessler, S&P's Internet software and services equity analyst.