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Investors in Google Will Buy into Company Secret of Computer System, Software

Posted on: Friday, 4 June 2004, 06:00 CDT

Jun. 5--When investors finally get to plunk down their cash for a piece of Google, they will also be buying into a secret: the computer system and software that powers the biggest and best- known Internet search engine.

Long the subject of rumor, what makes Google Google has been largely kept from the public, though tantalizing tidbits occasionally emerge in obscure academic papers.

"There's a sense of mystery about the company, and the mystery's only deepened over the years," says Chris Sherman, an editor at searchenginewatch.com, the industry bible, who's toured some Google facilities in Mountain View, Calif.

And that mystique is part of what's fueling investor interest in Google's initial public offering, expected later this year. The company filed documents in late April saying it would seek to raise $2.7 billion in an unusual auction-style IPO, while at the same time strive to make the world "a better place."

What's the allure of Google, compared to the previous generation of Internet highfliers? How about profits?

Unlike its predecessors, Google would come onto the trading floor actually putting up big numbers in net revenue -- like $105 million last year on sales of $961 million. It made this chunk of change by selling keyword links as advertising, so that when users search for a specific topic, related paid items come up nearby.

Its success has drawn the big guys into the search race as well, with Yahoo! coming in a close second in terms of search traffic and Microsoft beginning to gear up a big effort. Google officials did not respond to requests for comment.

What makes the company legitimately interesting to some experts is that the Google network that indexes some 4.3 billion Internet pages could be turned to other, lucrative uses as well. It's this blend of technology and unknown promise that has investors anticipating the unusual auction of shares.

Officially, the company will only say that it has more than 10,000 PC-based servers and something called the Google File System to keep them all humming along nicely.

However, most experts put that number at more than 100,000, which could make Google's multiple data centers the biggest and most powerful computer cluster in the world.

"A lot of people think 400 terabytes of memory is a lot of memory," said Peter Christy, cofounder of the NetsEdge Research Group, a market research and strategy firm in Silicon Valley. (A terabyte is more than 1,000 gigabytes, or enough to hold 20,000 music albums.)

As for software, the company says it's running Linux, but no one's sure whether it's a run-of-the-mill Linux variant dedicated to searching, or a fully developed, fault-tolerant operating system that can handle any task across Internet-sized batches of data.

Even the staffing is tantalizingly obscure: Some reports indicate that a mere 20 technicians handle all maintenance on those 100,000 systems, an unheard-of level of efficiency. At the same time, top PhD talent from the California Institute of Technology, University of California-Berkeley and Stanford University has been disappearing into the firm's lavishly funded research and development program on operating systems.

What is known about Google's computers is that the company has made a fetish of keeping down hardware costs, says Christy of NetsEdge. "When you see their books, you'll see the cost of that hardware is practically nothing compared, say, to electricity and air-conditioning."

Where other Silicon Valley start-ups would buy big expensive systems and software from turnkey vendors like Sun and IBM, the original Google platform was built, in 1998, from parts scrounged at Stanford University by founders Larry Page and Sergey Brin.

Later, the company adopted a practice it continues to this day: buying the cheapest motherboards and processors it can find and having its own technicians build makeshift cases to pack the units together on homemade racks. Hard drives were Velcroed to the cheap plastic covers, and a maze of wiring connected the power supplies and network.

By some accounts, Google packed so much computing power into so little space that data center landlords often sought to renegotiate leases because of soaring power and air-conditioning costs.

Sherman says some of these makeshift racks were still in use when he toured a Google facility two years ago, although the company appears to be moving to more conventional-looking devices.

On the software side, simply scaling its version of the free, open-source Linux operating system to operate reliably across 100,000 -- or even 10,000 -- computer systems is a huge achievement, Christy said.

"At that scale, you're going to break everything -- networking, switches, servers, software -- unless you get rid of all the software bugs that are in the standard distributions." Minor outages and malfunctions don't bother the system, since there are at least three copies of everything running on separate computers.

The experience and software that manages this is all proprietary to Google but something that could be sold to others to adapt to tasks that can't even be imagined today.

Where investors need to wrestle with the mystery of Google is what this all means for future business.

Much about the company can be known or estimated precisely: the number of users, ad pages and data saved. What may or may not justify expected stratospheric IPO prices, its technology, is a lot harder to quantify.

"They may not know what they're going to do with it," Skrenta said, "but who knows where they'll be two years or five years from now? The people who invented Unix probably couldn't imagine something like eBay."

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