Internet search engine Google Inc. (NASDAQ/GGOG) recently announced that it was seeking to raise about $4.2 billion in cash by issuing an additional 14.2 million common shares, representing just over 0.05% of its current total outstanding. So why would a company that currently has about $3 billion in free cash and only $291,000 in debt need more cash?

 Google did not say what the intention of the share issue was, but it did say it was slated for "general corporate purposes" that could involve acquisitions. But, with billions already in free cash, you know it is not for everyday business expenses. Google clearly has something planned. So in the absence of any indication, the market is left to speculate on the purpose of this new funding.

 The Street has speculated that Google may take a run at Chinese search firm Baidu.com. This would make a whole lot of sense, as it would give the king of search engines more clout in the ever- expanding Chinese market.

 And here's what I think. At present, Google derives a significant portion of its revenues from Internet advertising, which has seen a strong rebound over the last few years. In fact, according to JupiterResearch, the amount U.S. advertisers will spend on search ads will surge from $3.1 billion in 2004 to an estimated $7.5 billion by 2010. That is explosive growth!

 But Google also realizes that the competition will heat up from rivals such as Yahoo! Inc. (NASDAQ/YHOO) and Microsoft Corp. (NASDAQ/MSFT). MSFT has launched a new search engine that could threaten Google, and the thinkers at Google know this.

 In addition, Google's significant dependence on Internet advertising is a major risk, especially when the cycle begins to turn down, leaving the company exposed to declining revenues and growth. And given Wall Street's desire for strong growth, you know Google is concerned. In order to hedge against this, Google will clearly look at diversifying its revenue stream away from Internet advertising. It may have its eyes on another search engine, but I believe Google is looking at something totally different, something that offers superior growth opportunities. Google demands this, and so do its stockholders who have been willing to shell out nearly $300 a share.

 So what will it be? I have heard that an Internet telephone service could be a possibility. Yahoo! has already begun to offer its free worldwide Internet phone service via Yahoo Messenger, and you know this has caught the eyes of the brain trust at Google.

 Now it is time to wait and see. Google could soon announce a major acquisition. The company could develop its own new products too, but that might take too long given the rapidly changing Internet. And with aims for $7 billion in the bank, you know Google is not only interested in collecting interest!