Google: Microsoft's Yahoo Bid "Troubling"

But Analysts Say Google Must Tread Lightly In Raising Antitrust Concerns

(CBS/AP)  Google Inc. says Microsoft Corp. could use its proposed $42 billion acquisition of Yahoo Inc. to gain illegal control over the Internet, underscoring the online search leader's queasiness about its two biggest rivals teaming up.

Google's opposition to the proposed deal isn't a surprise, given that Microsoft views Yahoo as a crucial weapon in its battle to gain ground on Google in the Internet's booming search and advertising markets.

Yahoo so far has had little to say except that its board will carefully examine Microsoft's bid - a process that "can take quite a bit of time," according to a message posted on the Sunnyvale-based company's Web site.

Google's critical remarks, posted online Sunday by the Mountain View-based company's top lawyer, represented its first public reaction to Microsoft's unsolicited bid for Yahoo since the offer was announced Friday.

"Microsoft's hostile bid for Yahoo raises troubling questions," David Drummond, Google's chief legal officer, wrote. "This is about more than simply a financial transaction, one company taking over another. It's about preserving the underlying principles of the Internet: openness and innovation."

But Google's effort to raise antitrust concerns has several flaws, analysts said.

For starters, regulators pay more attention to the views of customers and consumers than to those of competitors when reviewing consolidation, antitrust attorneys said. On its specific arguments against the acquisition, Google also may not have made the strongest case possible, these attorneys said.

The biggest hurdle when one rival complains about another is that "the regulators suspect the deal might be good for competition," Stephen Houck, a former antitrust enforcer in New York state, said Monday.

"Google has to tread very carefully, lest it have a negative impact," said Houck, who is counsel for a group of states, led by California, that pushed to extend court oversight of Microsoft's landmark 2002 antitrust settlement. A judge recently extended that oversight until November 2009.

CBS News correspondent Anthony Mason reports that Microsoft is after a $30-40 billion online advertising market that's expected to double in the next five years - because search engines are where the money is.

"On the Internet, search is everything. If you're searching, then you're giving me a little bit of an idea of what you're all about. Search is at the very core of the consciousness of the user," CNET.com editor-at-large Brian Cooley told Mason.

Meanwhile on Monday, Google, whose stock is down about one-third from its high of $741.79 on Nov. 6, fell $20.47, or 4 percent, to $495.43, Dow component Microsoft dipped 26 cents to $30.19, and Yahoo rose 95 cents, or 3.4 percent, to $29.33.

Redmond, Wash.-based Microsoft has been trying to depict a Yahoo takeover as a boon for both advertisers and consumers because the two companies together would be able to compete against Google more effectively.

But Google is painting a starkly different picture, asserting that Microsoft will be able to stifle innovation and leverage its dominating Windows operating system to set up personal computers so consumers are automatically steered to online services, such as e-mail and instant messaging, controlled by the world's largest software maker.

In a move that illustrates just how badly Google wants to torpedo the deal, Google Chief Executive Officer Eric Schmidt called Yahoo CEO Jerry Yang Friday to offer his help in repelling Microsoft, according to a report Sunday on The Wall Street Journal's Web site, which cited anonymous people familiar with the matter.

The assistance didn't include a counterbid, but may have included supporting other potential suitors, or a revenue guarantee in exchange for an ad partnership with Yahoo, the people said, according the newspaper.

AT&T Inc., Time Warner Inc. and News Corp. aren't planning to enter the bidding, the Journal said, citing the people familiar.

To help make its point, Google pointed to the way Microsoft previously used Windows to help extend the reach of its Web browser and other applications - a strategy that triggered a U.S. Justice Department lawsuit alleging the software maker illegally used its operating system to stifle competition. The dispute ended with a 2002 settlement that required Microsoft to abandon some of its past practices.

"Could Microsoft now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC?" Drummond wrote.

Brad Smith, Microsoft's general counsel, said preventing Microsoft from buying Yahoo would undermine competition by allowing Google to become even more dominant than it already is on the Internet

"Microsoft is committed to openness, innovation, and the protection of privacy on the Internet," Smith said. "We believe that the combination of Microsoft and Yahoo will advance these goals."

If they get together, Microsoft and Yahoo would have about 16 percent of the worldwide Internet search market - still far behind Google's 62 percent share, according to comScore Media Metrix. But Microsoft and Yahoo already are far bigger in than Google in e-mail and instant messaging, and conceivably would be in a better position to squash rival services if they combined.

Illustrating the enormous stakes involved in a deal that could reshape the technology and media industries, Google and Microsoft are already debating the pros and cons before Yahoo has responded to the offer.

In its Web site posting, Yahoo has said its review of the proposal "will include evaluating all of the company's strategic alternatives, including maintaining Yahoo as an independent company."

Most analysts believe Yahoo will have little choice but to sell to Microsoft, with its stock price near a four-year low at the time of the bid and its profits falling since late 2006. When it was first announced, Microsoft's offer was 62 percent above Yahoo's market value - a premium analysts doubt any other suitor will be able to top.

If Yahoo accepts, antitrust regulators in both the United States and Europe are expected to begin an exhaustive review that some experts think could last a year. Microsoft believes it could get the necessary approvals to take over Yahoo late this year.

If nothing else, Google probably will try to raise enough alarms about the Microsoft-Yahoo deal to delay its approval for as long as possible. By doing so, Google would have more time to draw up plans to counteract the combination.

Google also is borrowing a page from Microsoft's book by urging antitrust regulators to take a hard look at the proposed marriage between its two rivals.

Just days after Google struck a $3.1 billion deal to buy online ad service DoubleClick Inc. last year, Microsoft began lobbying regulators to block the transaction. U.S. regulators blessed Google's DoubleClick acquisition late last year after an eight-month review, but the antitrust inquiry in Europe remains open.

[nlm2383]

That''s exactly what I was thinking rafterman1... They''re pitching a fit like a child.

[hypnotoad72]

It is troubling. Creative capitalism allows competition; not monopolization.

Where am I wrong? I''ll listen and likely concede my viewpoint. I''m good at that sort of thing... :)

[missingamerica]

The most troubling thing to me is that this "buy the skillset" approach suggests that Microsoft has been unable to make a go of "Live Search" etc.

Unfortunately, I believe that I have seen this before; a corporation begins to "mature", which is another way of saying that it becomes top heavy and so cliquish and bureaucratic, and as a result it stifles internal intellectual freedom and thus creativity.

That forces it to begin to look outside of itself; it begins to buy "things" in search of the coupling that will reward its top level managers with higher stock prices.

Quite often, though, the bureaucratic mass it has attained also stifles its acquisitions, and the end effect is merely more lost jobs and money down the drain.

One of the first signs of this particular impending doom, of course, is falling back on lawyers and legal tactics; the old "drown them in lawsuits in lieu of making them obsolete" symptom. Microsoft has faced it from its competition for decades; perhaps familiarity does indeed breed contempt.

And now Google, too, is showing symptoms of that transition...

Regardless, monopolies (or corporate cooperatives, as the case may be) are evil things; consider what you paid at the gas pump this morning.

[enriquecaliente]

Microsoft are a bunch of Nazi''s. They want to do what the government wants to do. Control what the masses read, think and do. And once they do that. They will sell themselves to the Government, as big brothers silent partners in control of the people, world wide.

[michellem99-2009]

I would like MS to deal with their OS and not force Yahoo to be part of MS. I am **** at the fact that MS allows companies like Dell,HP to send us an image disc when asked for the MS disc..i spend my year of tech support battkling this issue..got no where. Yahoo be stamrt remain in own company. Vista sucks as it messed up seattle''s fire works Dec 31 07.

[walt1944-2009]

Anyone who works on a computer knows that it would benefit Microsoft a lot if, instead of gobbling up the competition with the blessing of the Great Emperor Bush II, it would spend that money into making "fixes" to their own products so that they would run right the first time.

There are still a lot of people out there who would rather run Windows 98, 2000, or XP, than run dumpy Vista only to find out that their old files under prior Windows applications don''t work now. But that is the way mega-companies like Microsoft make money and squeeze the public.

SIG HEIL, BUSH!!!

[ontheleft]

I can''t remember the last time the antitrust laws in this country were actually enforced. I''m amazed at how these buyouts sail through. Anyone remember Drakes from Seinfeld?

Hostess snack cakes bought out Drakes - the only real competition that Hostess had on the East Coast. Drakes made some very popular products like Devil Dogs and Coffee Cakes that Hostess simply could not compete with. The rule in America is if you can''t beat the competition, buy them out to eliminate them.

The antitrust regulators approved the buyout because it noted that Little Debbie would still offer consumers an alternative choice. Little Debbie cakes are disgusting, cheaply made trash priced at $1 a box. Hostess effectively eliminated its only real competitor.

[bobnjersey]

[Anyone who works on a computer knows that it would benefit Microsoft a lot if, instead of gobbling up the competition with the blessing of the Great Emperor Bush II, it would spend that money into making "fixes" to their own products so that they would run right the first time.]
[Posted by walt1944 at 05:48 PM : Feb 04, 2008]

only when the license agreement that they make everyone check off (sign) is legally invalidated will anything change. they have no liability for selling non-working and inefficient product. they have no liability for anything that doesn''t work in their os. they have no liability as a result of any secondary, tertiary, or any other level effects from the use of their products.

make them liable for selling cr@p ... and that will be the first day they worry about what they sell working for those who use it.

[red1530]

I don''t think the EU will like this. Don''t forget the Federal Government and the EU have to approve the deal.

[toolmangler-2009]

"Microsoft''''s Yahoo Bid "Troubling""
Translation: Google is pi$$ed it didn''''t get to buying Yahoo first.
Posted by rafterman1 at 09:10 AM : Feb 04, 2008



Right on raft, Microsoft has enough troubles trying to fix a top-heavy system (Vista) and is trying to keep Google off balance. I will not buy vista for three years because I am using a nearly bullet-proof version of XP-PRO that does everything I ask, when I ask it to.

even Apple couldn''t make me happier,

[Syndicate]

How do you gain Illegal control of the Internet? Google should work to restore their search engine to former usefullness. Anymore the first several pages of search results are adds. All microsoft needs to do to take the search engine crown from google is make a search engine that works. One that gives me what I am looking for in the first result not a bunch of commercials. Has anybody started a wiki search engine yet? Or how a bout a subscription based search engine that way I can just pay them to get rid of the advertisers. Some one out there could make a lot of money.

[Syndicate]

Red1530: Why does the EU have aprove the merger of two American companies?

[michellem99-2009]

Amen Tool..I think yer right and yer in the know..They oaght pull vista..make computer makers give us the MS disc..got a bloody image one.. I was /am **** to this day.. I have a very good library..on xp.

[neobrian-2009]

EU has NO SAY
Like it or NOT
When You Follow the leaders,...You play by Their rules

[Meg003]

MS will mess up Yahoo email. That irks me. MS''s latest browser, OS, Office and email have been worse than their predecessors for being user friendly and system resources friendly. I love Yahoo email, and I would hate to see MS "improve" it.

[red1530]

The EU does have an influence if Microsoft wants to have this deal legally recognized in the EU. If they ignore the EU they will be charged with violating their laws, even if they have America''s blessings.

[brianbwb-2009]

"For starters, regulators pay more attention to the views of customers and consumers than to those of competitors when reviewing consolidation, antitrust attorneys said."

Check the web blogs, it is clear that most knowledgeable consumers are clearly opposed to the idea of limiting even more choices to Micro$oft, and most who are aware of it ache for the "wine" project to become fully compatible with all current Windows apps, and not just games and Office.