Google IPO an Unlikely Lifeline for Technology

The love affair with Google's IPO seems to be coming to a rocky end, dashing hopes that the public offering would spark a similar love fest in the embattled tech sector.

Early on, some industry optimists cast the highflying search engine as the next Netscape that would herald a new era of tech investing. But that sentiment has cooled as the IPO has lost some of its luster. Particularly in the past couple of weeks, investors have been grousing about the IPO's proposed $100-plus price tag and the timing of the offering during the August doldrums, when most of Wall Street takes a summer vacation.

Tech experts say that the company's public debut is more likely to only marginally build momentum for others to go public -- and that's assuming its unconventional Dutch auction goes smoothly.

"I think a lot of people are hoping that Google creates some demand in tech, especially for some of these smaller IPOs, but I think the biggest determinant of market success for IPOs is just the market itself," said Tom Holman, a portfolio manager for Evergreen Funds. And "the market has not been very cooperative ... for IPOs."

Coming-Out Party

That's not immediately obvious from the sheer volume of IPOs this year. Although the Nasdaq is down about 10% since the beginning of the year and nearly 16% down from its 52-week high, 137 companies have gone public this year, far exceeding the 86 IPOs in 2003 and the 95 in 2002. On those numbers alone, "the [IPO] market is flying," says John Fitzgibbon, editor of IPO Web site 123jump.com.

But it's flying a little lower than earlier this year, much like the stock market. "It's been a great year" for IPOs, said a technology-focused investment banker, who asked to remain anonymous. But "[the IPO market] is certainly not as buoyant as it was two months ago."

One symptom of the declining health of the IPO market is the recent rash of discounting on offering prices. More than one-third of the companies that have gone public this year have trimmed their offering price from their initial range, while only 17 companies priced above that range, according to Thomson Financial.