July. 30,  ISSUE #043
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Feeling lucky? Google employees certainly do.

In an echo from Silicon Valley's dot-com past, Google's pending stock debut will soon turn thousands of the company's employees into paper millionaires.

Google's rank-and-file employees stand to be worth an average of about $2.8 million apiece based on the estimated value of the stock and options they hold, according to a Mercury News analysis of the company's financial documents released Monday. That's enough for two employees to team up and buy a small valley company, if they were inclined.

That assumes Google's deal sells shares to the public at the midpoint of the $108 to $135 price range Google suggested Monday as it prepares for its initial public offering of stock. The IPO is expected to occur in the next few weeks.

"It's a flashback to four years ago,'' said Allan McCall, a principal at Compensia, a compensation consulting firm, who reviewed the Mercury News analysis. That was a time ``when we saw a tremendous amount of value that was created and shared with a relatively small number of employees.''

Some financial consultants who have met with Google employees say they don't expect them to rush out to buy Ferraris or other expensive toys like the dot-commers of old.

"People at Google are much more conservative than the people who for no reason really became millionaires,'' said Ahmad Ghavi, a loan consultant with Washington Mutual. ``Their passion is what they do and not really in flashing their money.''

Still, unlike a typical IPO, Google is not obliging its employees to wait the traditional six months for the stock market to absorb the new stock before letting them sell some of their own vested shares.

Instead, Google is allowing its employees to sell in steps, including allowing them to sell some soon after the IPO happens.

In its Monday filing, Google said that employees and others who hold certain pre-IPO stock can sell 4.6 million shares 15 days after the IPO takes place. Then they can sell a total of 87.1 million at the three-, four- and five-month intervals thereafter. Including 170.8 million freed up at six months, employees and other pre-IPO investors will be allowed to sell a total of 262.5 million six months out.

Although investors in the past have frowned on newly public companies letting their employees sell early, in this case investors shrugged it off.

"It's a logical part of the process of becoming a publicly held company,'' said Allison Thacker, an investor with RS Investments in San Francisco. Rather than worry about employees selling, she wants to know how Google will retain its talented staff, an important key to making her potential investment more valuable.

"I want to know what gets them up in the morning, keeps them coming to work, eager to create as much value in the next five years as they did in the last five,'' Thacker said.

In estimating the average Googler's wealth, the Mercury News calculated that Google has granted 24.4 million shares to its employees since 2001. The estimates assume employees turned an additional 28 million options into shares of stock by ``exercising'' them over the same period. The estimate doesn't factor in employees' cost of exercising the options, which could be an average of $5.21 a share.

Google's documents don't disclose how many options that were granted before 2001 have already been turned into stock, which could further increase the Googlers' wealth.

To be sure, the hundreds of Google employees who started at Google three or more years ago will undoubtedly be far richer, according to details in one recent lawsuit against Google.

A former director of operations who was one of Google's first few hundred employees said in the suit that he got 119,000 stock options -- more than five times the average -- that would have been worth more than $10 million had the employee not been terminated.

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