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Merrill Lynch drops out of Google IPO

Updated prospectus

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Search engine Google has dropped Merrill Lynch from the group of bankers overseeing its Initial Public Offering.

In an updated prospectus, Google named Morgan Stanley and Credit Suisse First Boston as lead bankers for the flotation. There are conflicting reports as to who exactly left who. According to AP Merrill Lynch pulled out of the deal because it thought fees were too low. Google is offering shares via an auction rather than a traditional IPO, leaving smaller fees for bankers.

The search company also warned that government action against its email service could hit future profits. The prospectus also strengthens warnings that share prices may fall.

The prospectus warns that analysts are more interested in short-term profits rather than long-term, less-predictable ,profits - so they may push the price down. Because the sale will be by auction there may be a big gap between actual prices and those offered by analysts.

The prospectus also makes clear that Google staff and management will sell stock during the IPO. Traditionally staff are locked in and cannot sell shares for a period of weeks or months after trading starts.

There was another hint that all may not be well within the company. Anyone typing "out of touch management" into Google's search site was sent straight to the biog page for senior Google executives. The Google bomb was spotted by the New York Times. ®

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