Google Value Questions Burn Bright

Post-IPO, says Wolk, she can imagine Google trading at a slight discount to Yahoo!, given concerns such as Google's nondiversified business, compared to Yahoo!, and the threats of insider selling.

Wolk has a "net positive" rating on Yahoo!.

Looking at the second-quarter numbers, Squali took note of Google's disclosure that advertising on Google-owned Web sites grew 13.2% sequentially in the second quarter, while revenue from advertising on other companies' sites grew only 3.7% over first-quarter figures.

Because Yahoo! -- which confessed to a slowdown in its own paid search business in the second quarter -- doesn't break out specific numbers for that business, Squali says it's unclear whether Google or Yahoo! gained share in the second quarter.

But, given the disparity between the performance of Google-owned sites and the sites in the company's network, Squali says it's easy to see that Google.com traffic grew faster than that on the network. "I think it's a sign that when things get tough, the brand always wins," says Squali. (The analyst has a buy rating on Yahoo!; his firm represented a company that Yahoo! recently purchased.)

In other IPO-related news, Google -- which has rebelled against Wall Street tradition by, among other moves, opting for the nontraditional auction process to set its offering price -- appears to be taking the traditional route in one respect: conducting a pre-IPO road show of presentations to institutional investors.

The road show, according to one source, begins with a New York City cocktail party Monday night. It continues, say others, with a large luncheon in New York Tuesday. Google didn't respond to a request for other information about the road show.

In its Monday filing, Google disclosed that the staff of the Securities and Exchange Commission had recommended the SEC bring a civil injunction action against Google general counsel David Drummond, alleging violation of federal securities laws, including the antifraud provisions. The recommendation, says Google, arose out of Drummond's prior employment as CFO of SmartForce -- a corporate training firm that's now part of SkilSoft (SKIL Quote) -- and involves "certain disclosure and accounting issues relating to SmartForce's financial statements." Google says that none of the allegations involve Google.