NEW YORK (Reuters) - Google Inc. slashed the size of its closely watched initial public offering nearly in half to less than $2 billion on Wednesday, splashing cold water on what has been touted as the hottest Internet IPO in years.

The revision came as Google disclosed in an amended filing that the U.S. Securities and Exchange Commission has asked for "additional information" about the publication of a Playboy magazine article featuring an interview with Google's co-founders.

The IPO of the world's most popular Web search engine is now slated to raise as much as $1.9 billion, far lower than its previous size of as much as $3.5 billion. Trading could begin as early as Thursday.

Google, whose unusual auction IPO has attracted skeptics since it was announced in April, now estimates its shares will price between $85 and $95 each down from $108 to $135, amid a jittery market for technology shares and IPOs in general.

Shareholders more than halved the number of shares they plan to sell to 5.5 million from about 11.6 million, in light of the lowered price. Google co-founders Larry Page and Sergey Brin and Chief Executive Officer Eric Schmidt cut by half the number of shares they will offer.

Google still plans to sell about 14.1 million shares itself.

The Mountain View, California-based company disclosed the changes in a statement posted on its IPO Web site, http://www.ipo.google.com. Google spokeswoman Cindy McCaffrey confirmed the Web site contents, but declined further comment.

The SEC could not immediately be reached for comment.

The changes cut the potential maximum valuation of the company to $25.8 billion from $36.6 billion, based on securities filings. Google is conducting its offering as the overall market for IPOs slumps.

"The last thing you want when markets are fragile is a high-profile IPO running into difficulty," said Michael Browne, a fund manager at Sofaer Global Fund in London. "Sentiment-wise, it's not good."

The company said it asked the Securities and Exchange Commission to declare its registration effective Wednesday at 4 p.m. EDT. Google said the selling shareholders might offer an additional 2.9 million shares to meet demand.

NOT SURPRISING

The price cut did not surprise some fund managers who noted the jittery market for technology shares and Google's unorthodox choice to use a modified version of a Dutch auction to sell its shares.

In a typical Dutch auction, the offering is launched at the highest price at which all of the shares can be sold. However Google could price the IPO lower to get a wider distribution of shares to retail investors. That in turn may crimp demand from institutions who fear that a larger-than-normal retail investor base could make the stock particularly volatile.

"There's no way to accurately value them," said Elaine Crichton, a fund manager for Aegon Asset Management UK, which invests $2 billion of assets. "In this brand new world of a lot of due diligence, you can't say you went for an IPO because Google is a good brand."

Also possibly weighing on the IPO is the uncertainty Google faces in a brutally competitive market where rivals Microsoft Corp. (MSFT.O) and Yahoo Inc. (YHOO.O) have the funds to invest heavily in development.

"At some point, they may have to move into lower margin businesses, and we think the way the deal has been structured limits aftermarket demand," said Douglas Wright, a portfolio manager for Britannic Asset Management in Edinburgh, Scotland.

PROBLEMS

While the IPO might turn 30-something co-founders Brin and Page into very wealthy men, it has been beset by problems, especially in the last two weeks.

The problems include the weakened IPO market, concerns that a Playboy magazine interview with the founders might have violated securities rules, and the disclosure that the SEC has started an informal inquiry into Google's offer to buy back 23.2 million shares it may have issued illegally.

On Tuesday, the SEC didn't approve Google's registration statement, without giving a reason.