Google IPO looms large for local economy Google IPO looms large for local economy (August 06, 2004)

Realtors expect uptick in home sales

By Jon Wiener

Google has already revolutionized Internet search engines and online advertising. Now the Mountain View-based company's audacious Initial Public Offering (IPO) could make millionaires out of hundreds of local employees.

Google made national headlines last week after announcing an expected stock price range of $108 to $135 for its long-awaited IPO. Bidding could begin as soon as this week in the auction-style IPO.

Locally, the influx of money as a result of the IPO could impact big-ticket items like housing and auto sales.

"You're going to have 700 to 1,000 new millionaires over there," said Steve Scheck, assistant manager at Coldwell Banker in downtown Los Altos. "We're going see an impact -- anywhere from 25 to 40 percent are going to buy something that's nice and really spectacular."

Scheck said that 80 percent of the buyers he represented in 2000 were Cisco employees who were able to write checks rather than take out a mortgage.

Gary Wheeler, vice president of Saratoga-based Alain Pinel and manager of the Los Altos office, said that his staff already has had several Google employees express an interest in buying property, largely in Los Altos.

"It will certainly put some buyers in the market if these guys can get their cash out of the market," said Wheeler. "I'd think they could have a big impact. ... I think they're going to put their money in real estate."

It is unclear, though, whether the Google IPO will usher in the glorious return of Silicon Valley's heyday, as many pundits claimed months ago. Realtors like Scheck and Wheeler agree that interest rates and geopolitical events will always have more of an impact on the housing market.

For Google, the road to going public has not been a cakewalk. Aside from questions about the stock price, Merrill Lynch, one of the lead underwriters, pulled out in July, citing a lack of profit potential. Google is also facing suits alleging age discrimination and patent infringement.

Over at Allison BMW in Mountain View, general manager Rick Gebers isn't quite sure what to expect.

"If we're a beneficiary of it, fantastic," he said. "We're just sitting back hoping it's going to be a breath of fresh air."

With 24.5 million available shares, the IPO could be worth $3.5 billion and bring more than $1.5 billion in revenue to the company. Analysts and investment bankers lined up last week to decry the stock price as too high and question whether Google would generate as much capital as it expects. Even Google warned in its filing with the Securities and Exchange Commission that "our stock price could decline rapidly and significantly," after the IPO.

The filing also cautions that the IPO won't turn a quick profit for investors who have been salivating since April, when Google announced it would be going public. Instead, the company itself and its employees stand to gain the most.

"This could make more money for the company instead of the investors, and who wouldn't want to do that?" said one local financial adviser who works for one the IPO's underwriters. "If this works, it will be the way everybody conducts IPOs from now on."

E-mail Jon Wiener at jwiener@mv-voice.com

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