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Google to break acquisition dry spell

Google CEO Eric Schmidt told Reuters last week that the worst of the recession is behind the company, and he expects the company to start doing about one acquisition a month.

“Acquisitions are turned on again at Google and we are doing our normal maneuvers, which is small companies,” Schmidt told Reuters Television at the G20 summit in Pittsburgh.

That may be good news for VC-backed startups, which haven’t felt any love from Google since 2006, when the Internet search giant bought three VC-backed companies, including YouTube.

“My estimate would be one-a-month acquisitions and these are largely in lieu of hiring,” Schmidt said. “There may be larger acquisitions, but they really are unpredictable.”

In addition to more than $19 billion in cash, Google can use its stock to fund acquisitions. Its stock price has been on a tear recently, closing just under $500 a share last Wednesday, which is near its 52-week high of $507 per share.

In all, Google has acquired just five VC-backed companies since 2003, according to Thomson Reuters (publisher of PE Week). In addition to Sequoia Capital-backed YouTube, which it acquired for $1.65 billion in October 2006, Google paid undisclosed amounts for:

@Last Software Inc., a maker of 3D modeling software, in March 2006. @Last had previously raised an undisclosed amount of VC from Village Ventures.

Applied Semantics Inc. (f.k.a. Oingo Inc.), a maker of targeted advertising software, in April 2003. Applied Semantics had previously raised $5.4 million from Zero Gravity Internet Group, Ridgestone Corp. and individual investors.

Keyhole Inc., a maker of digital mapping software, in October 2004. Keyhole had previously raised $4.6 million from 550 Digital Media Ventures, In-Q-Tel and Intrinsic Graphics Inc.

• And Neven Vision Inc., a maker of facial recognition software to identify people in photos, in August 2006. Neven had previously raised $5 million from Anthem Venture Partners, Artisan Digital Media, Third Wave Ventures and Zone Ventures.

Now that Google is expected to buy one small company a month, what is unknown is what kind of company is a likely acquisition target. For a clue, consider that the Mountain View, Calif.-based company generates about 97% of its revenue from advertising. But it is pushing into new markets with such products as the Android mobile software and Chrome operating system for PCs. —Lawrence AragonMark Egan of Reuters contributed to this story.