Forget the Giants and Patriots: Years from now, February 2008 just might be best remembered for an all-star showdown of a completely different type. It's a three-way battle among Google, Microsoft and Yahoo.
Which is business as usual in the e-world, of course. But with last week's revelation that Microsoft had made a bid to buy struggling rival Yahoo, the stakes have suddenly gotten far higher.
And Google doesn't intend to just stand idly by and let the deal happen. From today's New York Times:
In an unusually aggressive effort to prevent Microsoft from moving forward with its $44.6 billion hostile bid for Yahoo, Google emerged over the weekend with plans to play the role of spoiler.
Publicly, Google came out against the deal, contending in a statement that the pairing, proposed by Microsoft on Friday in the form of a hostile offer, would pose threats to competition that need to be examined by policy makers around the world.
Privately, Google, seeing the potential deal as a direct attack, went much further. Its chief executive, Eric E. Schmidt, placed a call to Yahoo’s chief, Jerry Yang, offering the company’s help in fending off Microsoft, possibly in the form of a partnership between the companies, people briefed on the call said.
Google’s lobbyists in Washington have also begun plotting how it might present a case against the transaction to lawmakers, people briefed on the company’s plans said. Google could benefit by simply prolonging a regulatory review until after the next president takes office.
In addition, several Google executives made “back-channel” calls over the weekend to allies at companies like Time Warner, which owns AOL, to inquire whether they planned to pursue a rival offer and how they could assist, these people said. Google owns 5 percent of AOL.
So just how legitimate is Google's antitrust claim? According to AP Business Writer Christopher S. Rugaber:
Google's effort to raise antitrust concerns about Microsoft's $42 billion bid for Yahoo 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 an additional 18 months, until November 2009.
And expect the ever-resilient and deep-pocketed Google to have other tactics, as well. From the Reuters website:
Yahoo management is considering revisiting talks it held with Google several months ago on an alliance as an alternative to Microsoft's bid ... At $31 a share, Yahoo believes the bid undervalues the company, two sources said.
A second source close to Yahoo said it had received a procession of preliminary contacts by media, technology, telephone and financial companies. But the source said they were unaware whether any alternative bid was in the offing.
In a memo to Yahoo employees on Friday, which was obtained by Reuters on Sunday, Yahoo leaders wrote: "We want to emphasize that absolutely no decisions have been made -- and, despite what some people have tried to suggest, there's certainly no integration process underway."
Few natural bidders exist besides Google that could engage in a bidding war, and Google would be unlikely to win approval from antitrust regulators, some Wall Street analysts said on Friday.
The Wall Street Journal reported on its Web site on Sunday that Google's chief executive Eric Schmidt called Yahoo's chief executive Jerry Yang to offer his company's help in any effort to thwart Microsoft's bid.
Spokesmen for Yahoo and Google declined comment.
And the plot continues to thicken. So what do you think, readers? Is this potential merger a good thing or a bad thing? Will it make online advertising easier or cheaper, or more expensive? We'd love to hear your thoughts; as always, feel free to sound off in the comments section.
