Google, Microsoft and Yahoo! play pots-and-kettles 2.0

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By John Oates • Get more from this author

Posted in Financial News, 4th February 2008 11:21 GMT

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!!!!! Microsoft and Google engaged in skirmishing by statement this weekend as they began what is likely to be a rancorous, drawn-out battle over the future of Yahoo!.

Google weighed in with competition concerns amid rumours that Yahoo! might turn to the search giant to try and fend off the bid from Microsoft.

Google's chief legal officer David Drummond described the bid as "troubling" in a blog posted yesterday. Drummond said the deal was worrying because it endangered internet principles of openess and innovation.

Drummond said: "Could the acquisition of Yahoo! allow Microsoft - despite its legacy of serious legal and regulatory offenses - to extend unfair practices from browsers and operating systems to the Internet? In addition, Microsoft plus Yahoo! equals an overwhelming share of instant messaging and web email accounts."

Meanwhile Microsoft general counsel Brad Smith continues to push the line that the deal is actually good for competition, because it will provide a serious alternative to Google in search and online advertising. Smith warned: "The alternative scenarios only lead to less competition on the Internet."

Smith was also involved in the conference call announcing the bid for Yahoo!, and again pushed the line that the deal was pro-competition because it would provide a better rival to Google.

Reuters is quoting anonymous sources at Yahoo! who claim Yahoo! has turned to Google in order to fend off the unwelcome advances of Microsoft. Any full-scale takeover would likely alarm anti-trust regulators even more than the Yahoo!-Microsoft deal going through. So some form of alliance or revenue guarantee is seen as more likely.

Part of the problem for Yahoo! is the lack of likely rival bidders. Yahoo's CEO Jerry Yang emailed staff on Friday and said the Microsoft bid was "one of many options that we're evaluating".

But really in the current climate there are few other bidders - Murdoch's News Corp said at the weekend it had held initial talks with Yahoo! but wasn't interested in bidding. In an atmosphere of shrinking ad revenues there are few other media companies with enough cash to make serious offers. ®

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