How Many Ways Can Google Spend $4 Billion?

This column was originally published on RealMoney on Aug. 19 at 1:39 p.m. EDT. It's being republished as a bonus for TheStreet.com readers.

Google(GOOG Quote) plans to raise a whopping $4 billion in an equity offering. That's a whole lot of money for its coffers, and the news rightly garnered all kinds of buzz on Wall Street, and it's got me looking to get longer the stock here.

First let's put some perspective on the amount of money that we're talking about. Four billion dollars is more than 10% of General Motors'(GM Quote) and Ford's(F Quote) combined stock market capitalizations. That's right, shares of Google, a company that's been in existence for less than a decade, are worth more than twice the two largest car vendors in the world -- again, combined. (Yes, I'm ignoring the hundreds of billions of dollars of debt on the car companies' balance sheets.)

Google, since it came public, has handled its relations with Wall Street like a rebellious teen-ager to its parents. The company doesn't communicate often, and when it does, and it leaves the Street confounded and confused. And here we are again, confounded and confused about why this company would want to take down another $4 billion in cash. So what the heck does Google, which is already generating hundreds of millions of cash each quarter and has nearly $2 billion of cash and no debt on the balance sheet, need with another $4 billion.

Street Speculates as Google Counts

The most popular explanation from the talking heads and Google-ites is that the company's going to use the cash for acquisitions. In its SEC filing, the company does cite the potential of using this cash for acquisitions, and that seems to be pretty much the basis for these theories. I wrote in my newsletter several months ago that Google was kicking around the idea of getting full-fledged into offering voice services over the Internet, including exploring buying existing VoIP companies like Skype or Vonage.

In the months since then, I haven't heard that Google's taken that exploration much further, and I don't think Google will get into the VoIP business -- but with these guys I wouldn't rule anything out either.

Then there's the possibility that Google's going to acquire a video technology company such as TiVo(TIVO Quote). Sure. Raising $4 billion to buy a Tivo, currently valued at a few hundred million dollars is equivalent to using a tank to kill a spider. It'd work, but it's a little over the top.

And I don't think Google's about to use that cash to roll up a bunch of companies either. With the stock trading at the 50x multiple on next year's earnings estimates, the stock is great currency to use for the acquisitions anyway.