S-3 1 ds3.htm FORM S-3 Form S-3
Table of Contents

As filed with the Securities and Exchange Commission on August 18, 2005

Registration No. 333-            


SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM S-3

REGISTRATION STATEMENT

Under

The Securities Act of 1933


GOOGLE INC.

(Exact name of Registrant as specified in its charter)


Delaware   7370   77-0493581

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

 

1600 Amphitheatre Parkway

Mountain View, CA 94043

(650) 253-4000

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)


Eric Schmidt

Chief Executive Officer

Google Inc.

1600 Amphitheatre Parkway

Mountain View, CA 94043

(650) 253-4000

(Name, address, including zip code, and telephone number, including area code, of agent for service)


Copies to:

Larry W. Sonsini, Esq.

David J. Segre, Esq.

Christian E. Montegut, Esq.

Wilson Sonsini Goodrich & Rosati

Professional Corporation

650 Page Mill Road

Palo Alto, CA 94304

(650) 493-9300

 

David C. Drummond, Esq.

Donald Harrison, Esq.

Google Inc.

1600 Amphitheatre Parkway

Mountain View, CA 94043

(650) 253-4000

 

William H. Hinman, Jr., Esq.

Simpson Thacher & Bartlett LLP

3330 Hillview Avenue

Palo Alto, California 94304

(650) 251-5000


Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”), check the following box.  ¨

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ¨

 

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box.  ¨


CALCULATION OF REGISTRATION FEE

 


Title of Each Class
of Securities to be Registered

 

 

Amount to be
Registered (1)

 

 

Proposed Maximum
Offering Price
Per Share (2)

 

 

Proposed Maximum
Aggregate Offering
Price (1)(2)

 

 

Amount of
Registration
Fee

 

Class A common stock $0.001 par value

 

  14,759,265 shares   $ 283.60   $ 4,185,727,554   $ 492,661

(1)   Includes 600,000 shares that the underwriters have the option to purchase to cover over-allotments, if any.
(2)   Estimated solely for the purpose of computing the amount of the registration fee. The estimate is made pursuant to Rule 457(c) of the Securities Act of 1933, as amended, based on the $283.60, which represents the average of the high and low sales prices of the Registrant’s Class A common stock as reported by The Nasdaq Stock Market on August 11, 2005.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.



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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting any offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Prospectus (Subject to Completion)

Dated August 18, 2005

 

14,159,265 Shares

 

LOGO

Class A Common Stock

 


 

Google Inc. is offering 14,159,265 shares of Class A common stock.

 


 

We have two classes of authorized common stock, Class A common stock and Class B common stock. The rights of the holders of Class A common stock and Class B common stock are identical, except with respect to voting and conversion. Each share of Class A common stock is entitled to one vote per share. Each share of Class B common stock is entitled to ten votes per share and is convertible at any time into one share of Class A common stock.

 


 

Our Class A common stock is quoted on The Nasdaq National Market under the symbol “GOOG.” The reported last sale price on August 17, 2005 was $285.10.

 


 

Investing in our Class A common stock involves risks. See “ Risk Factors” beginning on page 4.

 


 

Price $             A Share

 


 

     Price to Public

   Underwriting
Discounts and
Commissions


   Proceeds to
Google


Per Share

   $                 $                 $             

Total

   $                 $                 $             

 


 

We have granted the underwriters the right to purchase up to an additional 600,000 shares to cover over-allotments.

 

The Securities and Exchange Commission and state securities regulators have not approved or disapproved of these securities, or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

It is expected that the shares will be delivered to purchasers on or about                         , 2005.

 


 

Morgan Stanley   Credit Suisse First Boston

 


 

Allen & Company LLC


Table of Contents

TABLE OF CONTENTS

 

     Page

Prospectus Summary

   1

Risk Factors

   4

Special Note Regarding Forward-Looking Statements

   23

Use of Proceeds

   24

Price Range of Our Class A Common Stock

   24

Dividend Policy

   24

Cash and Capitalization

   25

Selected Consolidated Financial Data

   26

Selected Quarterly Consolidated Financial Data

   28

 

 

     Page

Underwriters

   30

Notice to Canadian Residents

   33

Legal Matters

   34

Experts

   34

Information Incorporated by Reference

   35

Where You Can Find Additional Information

   36

 


 

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information that is different from that contained in this prospectus. We are offering to sell, and seeking offers to buy, shares of our Class A common stock only in jurisdictions where offers and sales are permitted. The information in this prospectus is complete and accurate only as of the date of the front cover regardless of the time of delivery of this prospectus or of any sale of shares. Except where the context requires otherwise, in this prospectus, the “Company,” “Google,” “we,” “us” and “our” refer to Google Inc., a Delaware corporation, and, where appropriate, its subsidiaries.


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PROSPECTUS SUMMARY

 

This summary highlights information contained elsewhere in this prospectus and incorporated by reference into this prospectus and does not contain all of the information you should consider in making your investment decision. You should read this summary together with the more detailed information included elsewhere in, or incorporated by reference into, this prospectus, including our financial statements and the related notes and schedule. You should carefully consider, among other things, the matters discussed in “Risk Factors.”

 

Google Inc.

 

Google is a global technology leader focused on improving the ways people connect with information. Our innovations in web search and advertising have made our web site a top Internet destination and our brand one of the most recognized in the world. We maintain the world’s largest online index of web sites and other content, and we make this information freely available to anyone with an Internet connection. Our automated search technology helps people obtain nearly instant access to relevant information from our vast online index.

 

We generate revenue by delivering relevant, cost-effective online advertising. Businesses use our AdWords program to promote their products and services with targeted advertising. In addition, the thousands of third-party web sites that comprise our Google Network use our Google AdSense program to deliver relevant ads that generate revenue and enhance the user experience. Advertisers in our AdWords program typically participate on a cost-per-click basis and pay us a fee each time a user clicks on one of their ads displayed either on our web sites or on the web sites of Google Network members that participate in our AdSense program. When a user clicks on an ad displayed on a web site of a Google Network member, we retain only a small portion of the advertiser fee, while most of the fee is paid to the Google Network member.

 

Our mission is to organize the world’s information and make it universally accessible and useful. We believe that the most effective, and ultimately the most profitable, way to accomplish our mission is to put the needs of our users first. We have found that offering a high-quality user experience leads to increased traffic and strong word-of-mouth promotion. Our dedication to putting users first is reflected in three key commitments we have made to our users:

 

    We will do our best to provide the most relevant and useful search results possible, independent of financial incentives. Our search results will be objective, and we will not accept payment for inclusion or ranking in them.

 

    We will do our best to provide the most relevant and useful advertising. Whenever someone pays for something, we will make it clear to our users. Advertisements should not be an annoying interruption.

 

    We will never stop working to improve our user experience, our search technology and other important areas of information organization.

 

We believe that our user focus is the foundation of our success to date. We also believe that this focus is critical for the creation of long-term value. We do not intend to compromise our user focus for short-term economic gain.

 

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Corporate Information

 

We were incorporated in California in September 1998. In August 2003, we reincorporated in Delaware. Our principal executive offices are located at 1600 Amphitheatre Parkway, Mountain View, California 94043, and our telephone number is (650) 253-4000. We maintain a number of web sites including www.google.com. The information on our web sites is not part of this prospectus.

 

Google®, AdSense, AdWords, I’m Feeling Lucky, PageRank and Keyhole are registered trademarks in the U.S. and several other countries. Our unregistered trademarks include: Blogger, Orkut.com, Froogle, Gmail and Picasa. All other trademarks, trade names and service marks appearing in this prospectus are the property of their respective holders.

 

The Offering

 

Class A common stock offered by Google

   14,159,265 Shares

Class A common stock to be outstanding after this offering

   191,129,404 Shares

Class B common stock to be outstanding after this offering

   101,679,186 Shares

Total common stock to be outstanding after this offering

   292,808,590 Shares

Use of proceeds

   We intend to use the net proceeds from this offering for general corporate purposes, including working capital and capital expenditures, and possible acquisitions of complementary businesses, technologies or other assets. See “Use of Proceeds” for additional information.

Nasdaq symbol

   GOOG

 

The number of shares of Class A and Class B common stock that will be outstanding after this offering is based on the number of shares outstanding at June 30, 2005, and excludes:

 

    15,701,708 shares of Class A and Class B common stock issuable upon the exercise of options outstanding at June 30, 2005, at a weighted average exercise price of $13.15 per share.

 

    348,722 shares of Class A common stock issuable upon the vesting of restricted stock units outstanding at June 30, 2005. The shares ultimately issued will be less than 348,722 shares as the shares are issued net of the employee’s applicable tax withholding obligation.

 

    9,327,246 shares of common stock available for future issuance under our stock award plan at June 30, 2005.

 

Unless otherwise indicated, all information in this prospectus assumes that the underwriters do not exercise the over-allotment option to purchase 600,000 additional shares of Class A common stock in this offering.

 

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Summary Consolidated Financial Data

 

The following table summarizes financial data regarding our business and should be read together with the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections and our consolidated financial statements and the related notes included in our annual and quarterly reports which are incorporated by reference in this prospectus.

 

    Year Ended December 31,

  Six Months Ended
June 30,


    2000

    2001

    2002

    2003

  2004

  2004

    2005

    (in thousands, except per share data)
        (unaudited)

Consolidated Statements of Operations Data:

                                                 

Revenues

  $ 19,108     $ 86,426     $ 439,508     $ 1,465,934   $ 3,189,223   $ 1,351,835     $ 2,641,011

Costs and expenses:

                                                 

Cost of revenues

    6,081       14,228       131,510       625,854     1,457,653     641,775       1,142,303

Research and development

    10,516       16,500       31,748       91,228     225,632     80,781       175,184

Sales and marketing

    10,385       20,076       43,849       120,328     246,300     104,681       179,976

General and administrative

    4,357       12,275       24,300       56,699     139,700     47,083       128,834

Stock-based compensation

    2,506       12,383       21,635       229,361     278,746     151,234       96,246

Non-recurring portion of settlement of disputes with Yahoo

                          201,000          
   


 


 


 

 

 


 

Total costs and expenses

    33,845       75,462       253,042       1,123,470     2,549,031     1,025,554       1,722,543
   


 


 


 

 

 


 

Income (loss) from operations

    (14,737 )     10,964       186,466       342,464     640,192     326,281       918,468

Interest income (expense) and other, net

    47       (896 )     (1,551 )     4,190     10,042     (1,198 )     33,408
   


 


 


 

 

 


 

Income (loss) before income taxes

    (14,690 )     10,068       184,915       346,654     650,234     325,083       951,876

Provision for income taxes

          3,083       85,259       241,006     251,115     182,047       239,869
   


 


 


 

 

 


 

Net income (loss)

  $ (14,690 )   $ 6,985     $ 99,656     $ 105,648   $ 399,119   $ 143,036     $ 712,007
   


 


 


 

 

 


 

Net income (loss) per share:

                                                 

Basic

  $ (0.22 )   $ 0.07     $ 0.86     $ 0.77   $ 2.07   $ 0.93     $ 2.65

Diluted

  $ (0.22 )   $ 0.04     $ 0.45     $ 0.41   $ 1.46   $ 0.54     $ 2.48

Number of shares used in per share calculations:

                                                 

Basic

    67,032       94,523       115,242       137,697     193,176     153,263       268,418

Diluted

    67,032       186,776       220,633       256,638     272,781     265,223       286,926

 

The following table presents a summary of our balance sheet data at June 30, 2005:

 

    On an actual basis.

 

    On an as adjusted basis to give effect to the sale of shares of our Class A common stock at our assumed public offering price of $         per share, and the receipt of the net proceeds from this offering, after deducting underwriting discounts and commissions and estimated offering expenses, as set forth under “Use of Proceeds” and “Cash and Capitalization.”

 

     At June 30, 2005

 
     Actual

    As Adjusted

 
     (in thousands)  
     (unaudited)  

Consolidated Balance Sheet Data:

                

Cash, cash equivalents and marketable securities

   $ 2,947,967     $    

Total assets

     4,497,718          

Total long-term liabilities

     95,491       95,491  

Deferred stock-based compensation

     (175,593 )     (175,593 )

Total stockholders’ equity

     3,953,857          

 

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RISK FACTORS

 

An investment in Google involves significant risks. You should read these risk factors carefully before deciding whether to invest in our company. The following is a description of what we consider our key challenges and risks.

 

Risks Related to Our Business and Industry

 

We face significant competition from Microsoft and Yahoo.

 

We face formidable competition in every aspect of our business, and particularly from other companies that seek to connect people with information on the web and provide them with relevant advertising. Currently, we consider our primary competitors to be Microsoft Corporation and Yahoo! Inc. Microsoft recently introduced a new search engine and has announced plans to develop features that make web search a more integrated part of its Windows operating system or other desktop software products. We expect that Microsoft will increasingly use its financial and engineering resources to compete with us. Both Microsoft and Yahoo have more employees than we do (in Microsoft’s case, currently nearly 14 times as many). Microsoft also has significantly more cash resources than we do. Both of these companies also have longer operating histories and more established relationships with customers and end users. They can use their experience and resources against us in a variety of competitive ways, including by making acquisitions, investing more aggressively in research and development and competing more aggressively for advertisers and web sites. Microsoft and Yahoo also may have a greater ability to attract and retain users than we do because they operate Internet portals with a broad range of content products and services. If Microsoft or Yahoo are successful in providing similar or better web search results compared to ours or leverage their platforms to make their web search services easier to access than ours, we could experience a significant decline in user traffic. Any such decline in traffic could negatively affect our revenues.

 

We face competition from other Internet companies, including web search providers, Internet advertising companies and destination web sites that may also bundle their services with Internet access.

 

In addition to Microsoft and Yahoo, we face competition from other web search providers, including companies that are not yet known to us. We compete with Internet advertising companies, particularly in the areas of pay-for-performance and keyword-targeted Internet advertising. Also, we may compete with companies that sell products and services online because these companies, like us, are trying to attract users to their web sites to search for information about products and services.

 

We also compete with destination web sites that seek to increase their search-related traffic. These destination web sites may include those operated by Internet access providers, such as cable and DSL service providers. Because our users need to access our services through Internet access providers, they have direct relationships with these providers. If an access provider or a computer or computing device manufacturer offers online services that compete with ours, the user may find it more convenient to use the services of the access provider or manufacturer. In addition, the access provider or manufacturer may make it hard to access our services by not listing them in the access provider’s or manufacturer’s own menu of offerings. Also, because the access provider gathers information from the user in connection with the establishment of a billing relationship, the access provider may be more effective than we are in tailoring services and advertisements to the specific tastes of the user.

 

There has been a trend toward industry consolidation among our competitors, and so smaller competitors today may become larger competitors in the future. If our competitors are more successful than we are at generating traffic, our revenues may decline.

 

We face competition from traditional media companies, and we may not be included in the advertising budgets of large advertisers, which could harm our operating results.

 

In addition to Internet companies, we face competition from companies that offer traditional media advertising opportunities. Most large advertisers have set advertising budgets, a small portion of which is

 

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allocated to Internet advertising. We expect that large advertisers will continue to focus most of their advertising efforts on traditional media. If we fail to convince these companies to spend a portion of their advertising budgets with us, or if our existing advertisers reduce the amount they spend on our programs, our operating results would be harmed.

 

We expect our revenue growth rate to decline and anticipate downward pressure on our operating margin in the future.

 

We expect that our revenue growth rate will decline over time and anticipate that there will be downward pressure on our operating margin. We experienced both of these trends in the three months ended June 30, 2005. We believe our revenue growth rate will generally decline as a result of increasing competition and the inevitable decline in growth rates as our revenues increase to higher levels. We believe our operating margin will experience downward pressure as a result of increasing competition and increased expenditures for many aspects of our business as a percentage of our revenues. Our operating margin will also experience downward pressure to the extent the proportion of our revenues generated from our Google Network members increases. The margin on revenue we generate from our Google Network members is significantly less than the margin on revenue we generate from advertising on our web sites. Additionally, the margin we earn on revenue generated from our Google Network could decrease in the future if our Google Network members demand a greater portion of the advertising fees, which could be the result of increased competition for these members.

 

Our operating results may fluctuate, which makes our results difficult to predict and could cause our results to fall short of expectations.

 

Our operating results may fluctuate as a result of a number of factors, many of which are outside of our control. For these reasons, comparing our operating results on a period-to-period basis may not be meaningful, and you should not rely on our past results as an indication of our future performance. Our quarterly and annual expenses as a percentage of our revenues may be significantly different from our historical or projected rates. Our operating results in future quarters may fall below expectations. Any of these events could cause our stock price to fall. Each of the risk factors listed in this “Risk Factors” section, and the following factors, may affect our operating results:

 

    Our ability to continue to attract users to our web sites.

 

    Our ability to monetize (or generate revenue from) traffic on our web sites and our Google Network members’ web sites.

 

    Our ability to attract advertisers to our AdWords program.

 

    Our ability to attract web sites to our AdSense program.

 

    The mix in our revenues between those generated on our web sites and those generated through our Google Network.

 

    The amount and timing of operating costs and capital expenditures related to the maintenance and expansion of our businesses, operations and infrastructure.

 

    Our focus on long term goals over short term results.

 

    The results of our investments in risky projects.

 

    Payments made in connection with the resolution of litigation matters.

 

    General economic conditions and those economic conditions specific to the Internet and Internet advertising.

 

    Our ability to keep our web sites operational at a reasonable cost and without service interruptions.

 

    Our ability to forecast revenue from agreements under which we guarantee minimum payments.

 

    Geopolitical events such as war, threat of war or terrorist actions.

 

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Because our business is changing and evolving, our historical operating results may not be useful to you in predicting our future operating results. In addition, advertising spending has historically been cyclical in nature, reflecting overall economic conditions as well as budgeting and buying patterns. For example, in 1999, advertisers spent heavily on Internet advertising. This was followed by a lengthy downturn in ad spending on the web. Also, user traffic tends to be seasonal. Our rapid growth has masked the cyclicality and seasonality of our business. As our growth has slowed, the cyclicality and seasonality in our business has become more pronounced and will in the future cause our operating results to fluctuate.

 

If we do not continue to innovate and provide products and services that are useful to users, we may not remain competitive, and our revenues and operating results could suffer.

 

Our success depends on providing products and services that people use for a high quality Internet experience. Our competitors are constantly developing innovations in web search, online advertising and providing information to people. As a result, we must continue to invest significant resources in research and development in order to enhance our web search tech