Google assails Microsoft over Yahoo deal



SAN FRANCISCO -- Google Inc. raised the spectre of Microsoft Corp. using its proposed US$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, Calif.-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, Washington-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 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.

Google's chief executive, Eric Schmidt also called his counterpart at Yahoo late last week to offer help in frustrating the bid, said a report on the Wall Street Journal's website Sunday, which cited anonymous people familiar with the matter. The help did not include a counterbid but may have included supporting other counterbids, or guaranteed revenue in exchange for an ad outsourcing agreement with Yahoo, the people said, the newspaper reported.

AT&T Inc., Time Warner Inc. and News Corp. aren't planning to bid for Yahoo, 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 per cent of the worldwide Internet search market -- still far behind Google's 62-per-cent share, said comScore Media Metrix. But Microsoft and Yahoo already are far bigger 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,'' said a message posted on the Sunnyvale-based company's website.

The review "will include evaluating all of the company's strategic alternatives, including maintaining Yahoo as an independent company,'' Yahoo said on its website.

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 per cent 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.

All I have to say is:

Isn't this the pot calling the kettle black?
Yeah pretty much. They both complain about the Monopoly, when they're both pretty much equally guilty of having a part of it. All at the same time trying to make the other guy to be the bad guy, making our lives more difficult and restrictive, when it's all about them loosing a couple of Billion here or there.

It won't really matter that much for us. Our money will either go into Google's pockets or Microsofts.... either way, nothing really changes.
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