Google Spends On ITGoogle Spends On IT

Google is upping its IT ante. In its latest financial filing, the company anticipates it will "spend over $500 million on property and equipment, including information technology infrastructure, to manage [its] operations during 2005," assuming suitable property and equipment are available.

That's significantly more than the $176.8 million the company spent on capital expenditures in 2003 and the $319.0 million it spent in 2004.In a recent report, the Susquehanna Financial Group says one area of investment will be storage, to accommodate the company's growing commitment to users of its free Gmail service.

The report notes that Google is trying to widen its lead over competitors, who will now have to decide whether they are underinvesting.

Yahoo certainly seems to be. Its capital expenditures totaled $52 million, $117 million, and $246 million in 2002, 2003, and 2004, respectively. The company's most recent 10-K points to increased IT spending in 2005, though it doesn't offer an estimate. It's difficult to say how much Yahoo will have to spend to keep up, but with Google's 2005 estimate running twice what Yahoo spent in 2004, it seems likely that someone at Yahoo is going to be writing a lot more checks.