Tags: Google, Jason Simpkins, Microsoft, Take Over

Google Chimes in on Microsoft's Bid For Yahoo

By , Money Morning •

By Jason Simpkins
Associate Editor

Google Inc. (GOOG) didn't waste any time before weighing in on Microsoft Corporation's (MSFT) takeover bid for Yahoo! Inc. (YHOO). Google officials lashed out against Microsoft's supposed motives yesterday [Monday], and even offered to help Yahoo! rebuff the takeover through a partnership of its own.

"While the internet rewards competitive innovation, Microsoft has frequently sought to establish proprietary monopolies - and then leverage its dominance into new adjacent markets," Google's top lawyer, David Drummond said in a posting on the company's blog.

The International Herald Tribune cited sources familiar with Google's operations as saying that company lobbyists are already appealing to lawmakers in Washington in an effort to stall or derail the deal.

Google Chief Executive Eric Schmidt also reportedly made a call to Yahoo's CEO Jerry Yang and offered his company's assistance in fending off the bid. Several other Google executives made "back channel" calls to companies such as Time Warner Inc. (TWX), owner of AOL, to determine whether a rival bid was planned.

Few analysts believe a bidding war with Microsoft is likely because the company has such deep pockets. Microsoft had $21.1 billion in cash and short-term investments as of Dec. 31. The company may be forced to borrow money for the first time ever to finance its proposed $44.6 billion takeover. Microsoft has proposed paying half of the offer with stock and the other half with cash.

Still, Yahoo insists that it has received calls from a number of suitors over the weekend. A tie-up between Google and Yahoo is not out of the question either. Talks between the two search engines stalled last year, but Yahoo may find more favorable terms if it aligns itself with its former rival now that Microsoft is in play.

Microsoft has done its best to deflect criticism.

"The combination of Microsoft and Yahoo will create a more competitive marketplace by establishing a compelling No. 2 competitor for Internet search and online advertising," Microsoft's general counsel, Bradford L. Smith, said in a statement. 

It's a fair point considering Google drew 56% of U.S. web search traffic in December, nearly double the combined share of Yahoo and Microsoft, which attracted 18% and 13% of the market, respectively.

However, Microsoft's reputation as a borderline industry thug is working against it.

"Google can tap into all of the ill will that Microsoft has created in the last couple of decades on the antitrust front," Eric Goldman, director of the High-Tech Law Institute at Santa Clara University School of Law told IHT.

But Microsoft isn't the only company accused of antitrust issues. Google did its share of feather rousing last April when it bid $3.1 billion for online advertising specialist DoubleClick.

"This proposed acquisition raises serious competition and privacy concerns in that it gives the Google DoubleClick combination unprecedented control in the delivery of online advertising, and access to a huge amount of consumer information by tracking what customers do online" Microsoft's Smith said in a statement. "We think this merger deserves close scrutiny from regulatory authorities to ensure a competitive online advertising market."

A chronology of events leading up to Microsoft Corp.'s rich offer for Web search and advertising competitor Yahoo Inc. Microsoft sees the deal as a way to catch up with market leader Google Inc., by far the best at turning Web searches into cash.

1975
  • Microsoft founded.

1995
  • Yahoo founded, begins serving ads online.
  • Microsoft launches MSN Web portal.

1998
  • Google founded.

2000
  • Yahoo starts delivering search results generated by Google's technology.
  • Google introduces AdWords, its system for displaying ads next to search results based on keywords used.

May 2001
  • Terry Semel becomes Yahoo's chairman and CEO.

February 2002
  • Microsoft taps Overture Services Inc., later bought by Yahoo, to power its advertising-driven search engine.
  • Google overhauls AdWords with cost-per-click model that makes online advertising easier and more cost effective for smaller businesses.

May 2002
  • AOL picks Google as search and advertising provider.

2003
  • Google AdSense launches, letting outside Web sites make money by plugging in targeted text ads by Google.

October 2003
  • Yahoo announces plans to buy Overture, giving it a system for selling search ads similar to Google's AdWords.

February 2004
  • Yahoo replaces Google search results with its own technology.

April 2004
  • Google launches free e-mail service Gmail, expanding ad opportunities.

August 2004
  • Google holds initial public offering.

December 2005
  • Google makes $1 billion, 5% investment in Time Warner Inc.'s AOL and extends ad partnership.

May 2006
  • Microsoft launches own Web ad platform, adCenter.
  • Microsoft signs up Facebook as first big client.

August 2006
  • Google wins search and ad deal with News Corp's MySpace and eBay Inc.

October 2006
  • Google announces plan to buy YouTube for $1.65 billion, giving it a highly popular video-sharing site on which to sell more ads.

November 2006
  • Yahoo builds advertising partnership with consortium of daily newspapers.

February 2007
  • Yahoo launches long-awaited search and advertising technology overhaul, known as Panama.

April 2007
  • Google agrees to pay $3.1 billion in cash to acquire ad-management technology company DoubleClick Inc.
  • Yahoo acquires online advertising exchange Right Media Inc. for $680 million.

May 2007
  • First rumors hit Wall Street that Microsoft is contemplating Yahoo buyout.
  • Yahoo CFO Susan Decker promoted to oversee advertising operations.
  • Microsoft says it will buy online ad company aQuantive Inc. for $6 billion in cash.

June 2007
  • Semel steps down as Yahoo's CEO; co-founder Jerry Yang takes over. Decker becomes president.

July 2007
  • Yahoo launches SmartAds, a behavioral, demographic and geographic ad targeting system.

August 2007
  • Microsoft buys AdECN Inc., a stock market-like Web ad exchange.
  • It also launches ContentAds, context-relevant ads on some sections of MSN.

September 2007
  • Yahoo announced plans to buy online behavioral targeting specialist BlueLithium Inc. for $300 million in cash.

October 2007
  • Yahoo announces plans to buy AdInterax, a rich ad business, for undisclosed amount.
  • Microsoft spends $240 million on a 1.6 percent stake in Facebook, ensures ad partnership will continue.

December 2007
  • Microsoft steals Viacom ad business from DoubleClick. Other ad deals since the acquisition of aQuantive include financial news site CNBC.com and Digg Inc., a reader-powered news site.
  • Google's proposed buyout of DoubleClick gets green light from U.S. regulators, still pending in Europe.

January 2008
  • Semel resigns as Yahoo's chairman.
  • Microsoft makes unsolicited $44.6 billion offer for Yahoo.

Source: The Associated Press

Here are the top five technology deals involving Silicon Valley companies over the past five years, including Friday's proposed acquisition of Yahoo by Microsoft.

RECENT BIG TECH DEALS IN SILICON VALLEY

 

DATE/DEAL VALUE

TARGET

ACQUIRER

ANNOUNCED   (BILLIONS)

Yahoo

Microsoft

Feb. 2008   $44.6¹

Veritas Software

Symantec

Dec. 2004   $13.7

PeopleSoft

Oracle

June 2003   $8.4

BEA Systems

Oracle

Oct. 2007   $6.8

Mercury Interactive

Hewlett-Packard

July 2006   $4.4

Footnotes: (1.) Value When Announced.

Sources: Bloomberg News, San Jose Mercury News, Money Morning Research.

[For further analysis on Microsoft Corp's attempted takeover of Yahoo Inc click here]

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