Google Bears Burden of Net Setback

Flotation Device

A positive for Google, says one investor, is the limited float implied by Google's indication that it will be selling $2.7 billion of stock. That $2.7 billion of stock on the market is only a fraction of Yahoo!'s float, which is worth about $36 billion at current prices. "Limited liquidity is always a positive," says the investor.

But negatives include the controlling stake held by founders Sergey Brin and Larry Page, and the company's relative youth as a public company.

Other negatives relate to Google's founders' lack of interest -- justified or not -- in conducting business as usual on Wall Street. One investor notes that Google might not conduct the traditional pre-IPO road show for institutional investors. "I don't buy anything until I get to see the management team in person," says the investor.

Chervitz says he's not happy about Google's announcement that it doesn't plan to give earnings guidance "in the traditional sense."

"I wish that could be a good thing," he says. "Unfortunately, mutual fund investors are judged on a quarterly basis."

Had he ignored quarterly issues with, for example, now-defunct portal companies such as Excite and InfoSeek, says Chervitz, "I would have been left with nothing. ... It's not a field where you can ignore the short-term issues. It's technology. It's fast-moving."

Chervitz also confesses to mixed feelings about Google's philosophy of "Don't Be Evil."

"It's a cute business motto," he laughs, "but sometimes to expand a business, you have to be quasi-evil."

In the end, say investors, their interest in Google comes down to its price. "The odds of me participating," says one, depend on the "realism" that the market has regarding paid search.

And, fantasizes another investor, one can't rule out the possibility that Google will be priced like a brand-new Mercedes selling for $10,000 on eBay (EBAY Quote).

"I don't care if you want one or not," says the buy-sider. "You're going to buy it."