Google to buy YouTube in $1.65B stock deal

The online video site will continue to operate independently

Google Inc. has laid the speculation to rest -- it is buying YouTube for $1.65 billion in a stock transaction announced late this afternoon.

YouTube operates a wildly popular Web site showing original videos that range from amateurish to professional. It will continue to operate independently after the Google acquisition "to preserve its successful brand and passionate community," Google said. The deal is expected to close in the fourth quarter.

Although YouTube CEO and co-founder Chad Hurley had earlier insisted that YouTube wasn't for sale, that view changed because Google will allow YouTube to operate independently, he said during a conference call to explain the acquisition.

Bringing YouTube into the ever-growing Google empire will mean that users have a "better, more comprehensive experience" when they upload, watch and share videos, Google said. It will also provide more opportunities for professional content owners to get their work out to a wider audience, Google and YouTube executives said.

The two companies have similar corporate values in that they are both committed to users first and also to innovation, Google CEO Eric Schmidt said. "Together, we are natural partners to offer a compelling media entertainment service," he said.

The deal is "an exciting next step" for Google, he said, adding that the company expects other deals that are related to providing video over the Internet. YouTube has "built a remarkable team" that is "a perfect example of the kind of people we like to work with."

He said YouTube's business is "extraordinary," not just in terms of its business success, but also in its vision of serving users, Schmidt said.

YouTube will benefit from Google's global reach and technology know-how, Hurley said. "We're excited by this announcement and thrilled to join forces with the Google team," he said. The acquisition will boost YouTube's new video content platform, which is expected to launch in the next month, he said.

The companies will merge Google's search expertise with YouTube's video expertise, pushing what executives believe is a hot emerging market of video being offered over the Internet.

Google Video will continue to operate, executives said, calling that service "a very valuable aspect of the Google experience." The aim is that it will be improved as a result of the acquisition, Google officials said.

The number of Google shares to be issued will be based on the 30-day average closing price two trading days before the deal is completed, Google said. 

Copyright © 2006 IDG Communications, Inc.

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