Google Gets Bitten By The Auction Rate Securities Bug (GOOG)

We missed this the first couple times we looked at Google’s 10-Q, but Lehman’s Doug Anmuth picked up on it: Google is holding $259.6 million worth of “auction rate securities”, and like everyone else who owns these things, doesn’t really know what, if anything they’re worth.

Obviously this is a non-issue for Google (GOOG): That $260 million is about 2% of Google’s $12.1 billion cash hoard, or about 20% of Google’s net profit for the last quarter. Even if it had to wipe the entire thing off its books, it would have plenty left to invest in money-burning businesses.

The bigger issue is for other tech companies, public and private, that may still be trying to grapple with the auction rate problem. This is the first time that Google has disclosed its auction rate investments, which are bonds that were sold as “cash on steroids” but have since imploded. So we imagine we’ll see other companies making similar announcements.

Earlier this spring our contributor Sarah Lacy surveyed her pals in the Valley and said that the panic over auction rates was overblown, and that smart startups avoided these things and weren’t cash-strapped to begin with. Other folks we’ve talked to think the problem may be more serious. We hope they’re wrong and Sarah’s right.

See Also:
When Will Auction Rates Securities Blow Up The Valley?
Google’s Headcount Soars
Google Getting Goose Eggs From YouTube

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