GoogleYahoo Rivalry Moves Into 2005

Even as they trade counterpunches punctuating their similarities, Internet heavyweights Google Inc. and Yahoo Inc. have strived for different goals distinctions that may become more apparent as the fierce rivalry moves into 2005.

Google, owner of the leading online search engine, is devoted to a single-minded mission: transforming the way the world finds and stores information, even if that means sending people somewhere else.

Yahoo, owner of the world's most popular Web site, is taking a more multidimensional approach as it strives to be all things for all people a one-stop destination for recreation, work and research.

"The differing visions of the companies' founders and management teams will likely lead them down very different paths," UBS analyst Benjamin Schachter predicts in a recent research report.

The philosophical contrasts already influence how the rapidly growing companies spend the money that's cascading into their bank accounts.

Mountain View-based Google devotes significantly more of its budget to research and development, with more than $300 million about 30 percent of its operating cash flow earmarked for capital expenditures this past year. Meanwhile, Sunnyvale-based Yahoo is expected to spend $215 million to $235 million on capital expenditures, or about 20 percent of its operating cash flow.

Schachter believes the capital expenditure gap will widen in 2005 when he projects Google will spend $450 million while Yahoo allots about $250 million. If those estimates pan out, Google's capital expenditures, broken down as a percentage of operating cash flow, will be similar to such technology leaders as Microsoft Corp. and Intel Corp.