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Google: Microsoft Deal Bad for Internet
SAN
FRANCISCO FEB 08 – Google Inc. raised the specter of Microsoft Corp.
using 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.The
critical remarks, posted online Sunday by Google’s top lawyer,
represented the Mountain View-based company’s 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.”Google’s opposition 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.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.Yahoo so far has 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.The review
“will include evaluating all of the company’s strategic alternatives,
including maintaining Yahoo as an independent company,” Yahoo said on
its Web site.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.
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