July 19 (Bloomberg) -- Google Inc., with sales slowing after a sevenfold increase in the past three years, is seeking acquisitions worldwide.
Google says it has about a dozen people weighing deals that might be financed with stock and its $11.9 billion in cash and marketable securities. The owner of the most-popular Internet search engine announced eight purchases in the second quarter, its busiest since going public in 2004, including the $3.1 billion buyout of DoubleClick Inc.
Revenue growth probably slipped in the period to 60 percent from 77 percent a year earlier, according to the average of 31 analysts' estimates in a Bloomberg survey. Google will release its results after regular Nasdaq trading ends today. Recent purchases improved its maps service, added software for creating online presentations and shored up the security in programs for small businesses, Google said.
``They realized they can't invent it all,'' said Todd Dagres, general partner at venture firm Spark Capital in Boston. ``They've got a very attractive stock price with which to make acquisitions.''
Dagres, whose firm oversees more than $600 million, said some of the companies he invests in had discussions with Mountain View, California-based Google. He wouldn't name them.
Excluding sales passed on to other Web sites, Google's revenue probably increased to $2.68 billion last quarter from $1.67 billion a year earlier, analysts estimate.
Net income probably rose 35 percent to $974.3 million, or $3.02 a share, from $721 million, or $2.33, a year ago, the survey showed. Profit doubled in the year-earlier period.
End of Party?
Google shares, which have climbed 19 percent this year and are trading near a record, fell $4.05 to $545.45 at 12:50 p.m. New York time in Nasdaq Stock Market trading. The stock's 2007 gain is twice that of the Standard & Poor's 500 Index, which has advanced 9.5 percent.
While sales and profit growth have slowed in each of its three years as a public company, Google is still expanding at more than twice the rate of Microsoft Corp., Cisco Systems Inc. and Hewlett-Packard Co.
``We fully recognize that the party at Google has to end sometime,'' Derek Brown, a San Francisco-based Cantor Fitzgerald analyst who rates the shares ``buy,'' said in a July 13 report. ``Yet we see no obvious signs that Google's business has hit the proverbial wall or that consumers and advertisers are radically shifting their behavior.''
`Outer Rings'
Google announced its two biggest purchases in the past nine months. The company agreed to buy San Bruno, California, video- sharing site YouTube Inc. in October for $1.65 billion, followed in April by the deal for New York's DoubleClick, which gives Google software for creating and measuring Internet ad campaigns.
In searching for companies to buy, Google looks for engineers, intellectual property or innovative products, and ways to increase Web traffic, said Salman Ullah, director of corporate development. Google makes an average of one or two acquisitions a month and focuses mostly on companies outside of its main search and advertising businesses, he said.
``A lot of our work is on the outer rings of what Google is working on,'' said Ullah, who joined Google in 2004 after heading corporate strategy at Redmond, Washington-based Microsoft.
Ullah, 43, runs the acquisition team, with about half its staff in the U.S. He said most deals are in Silicon Valley, where ``the ecosystem is very rich.'' The faster acquisition pace last quarter doesn't reflect a change in strategy because in some periods ``deals just stack up,'' he said.
Going Shopping
Google's purchases include Panoramio, a Callosa de Segura, Spain-based site that lets users store photos and link them to online maps, and Redwood City, California's Peakstream Inc., whose software allows programmers to make better use of microprocessors.
Tonic Systems Inc., a San Francisco company purchased in April, brings Google software for Web presentations as it tries to lure customers away from Microsoft. Google also agreed this month to buy San Carlos, California-based Postini Inc. for $625 million, adding data centers that process and protect customers' e-mails and instant messages.
``They buy something that will help them go into and build their way into a new market,'' said Jeffrey Lindsay, a New York- based Sanford C. Bernstein & Co. analyst who rates the shares ``outperform.'' He estimates the company has made 45 acquisitions since February 2001.
Even as growth slows, Google extended its lead in its main search business over Sunnyvale, California-based Yahoo! Inc. Google's share of U.S. Internet queries rose to 52.7 percent in June from 49.4 percent a year earlier, according to New York- based Nielsen//NetRatings. Yahoo dropped to 20.2 percent from 23 percent.
``Google is continuing to increase its search share,'' Lindsay said. ``We don't see any end in sight.''
To contact the reporter on this story: Ari Levy in San Francisco at Alevy5@bloomberg.net
