Google comes to the aid of Yahoo!

February 4th, 2008 - 12:55 pm ICT by admin  

By Arun Kumar
Google Logo Washington, Feb 4 (IANS) Google Inc has joined the Internet war by offering its help in any effort to thwart its chief rival Microsoft Corp.’s unsolicited $44.6 billion bid for Yahoo!, the Wall Street Journal reported citing people familiar with the matter.

Google Chief Executive Eric Schmidt called Yahoo! Inc. CEO Jerry Yang to offer his company’s help as Yahoo! assessed its options for responding to Microsoft’s aggressive “bear hug” bid, which has sent aftershocks through the media and technology industries.

Yahoo LogoYahoo!’s board, which conferred by telephone Friday, hasn’t taken a position so far and no rival bids have emerged yet, though it remains possible some will, the financial daily said.

Microsoft LogoHowever, another news agency report said that Yahoo Inc would consider a business alliance with Google Inc as one way to rebuff Microsoft.

Yahoo! said it had received a procession of preliminary contacts by media, technology, telephone and financial companies. But its sources were unaware whether any alternative bid was in the offing.

The Wall Street Journal said Google itself is considered unlikely to bid for Yahoo! because of regulatory concerns related to their large shares of the search and online advertising markets. However, Google could play a role in attempts by others to outbid Microsoft, or by Yahoo! to remain independent.

Google could potentially offer money, or guaranteed revenue in return for a Yahoo! advertising outsourcing pact under that scenario, the Journal said citing people familiar with the matter.

Even such involvement by Google would likely attract antitrust scrutiny because of concerns that competition between the two Silicon Valley Internet companies could be reduced, it said.

A Google spokesperson declined to comment on any interest in Yahoo! or contact between the two companies. Google in a blog post said Microsoft’s pursuit of Yahoo! “raises troubling questions” about whether it would give Microsoft too much power that could be abused.

Microsoft responded by saying the deal would “create a more competitive marketplace by establishing a compelling No. 2 competitor for Internet search and online advertising”.

The Wall Street Journal said a number of technology, media and financial companies have since Friday discussed with Yahoo! and its advisers their possible interest in participating in a bid for the company. But so far no serious rival bids have emerged from that.

AT&T Inc., News Corp. (owner of Dow Jones & Co., publisher of The Wall Street Journal) and Time Warner Inc. - all considered candidates to do such a deal -aren’t preparing rival bids for Yahoo!, the daily said. It remains possible, though unlikely, that this situation could change, it added.

Yahoo! has said its directors would weigh the Microsoft offer and any alternatives, including keeping Yahoo! independent, “and pursue the best course of action to maximise long-term value for shareholders”.

Yahoo! had already been in negotiations in recent weeks to outsource its Web-search advertising in Europe to Google. Since last year, investors have called for Yahoo! to abandon its own search advertising system, which generates significantly less ad revenue for each consumer search, and use ads from Google in return for a majority share of the revenue.

The discussions with Google, which could potentially be a first step to a broader search-ad outsourcing deal, are expected to continue despite Microsoft’s approach, the daily said citing a source. The two sides recently hit a disagreement on the revenue split between them, it added citing another source.

Citigroup global markets analyst Mark Mahaney in a Friday research note estimated that Yahoo could boost its cash flow more than 25 percent annually by outsourcing all its search advertising to Google.

Yahoo! executives had reportedly considered such a manoeuvre as part of a strategic review last year, but Yang in October had signalled the company had decided against it.

Rival bids, including any with Google’s support, could be crucial to efforts by Yahoo! to at least secure a higher price for the company. Some investors believe Microsoft’s offer of $31 a share - a 62 percent premium to Yahoo!’s 4 p.m. trading on the Nasdaq last Thursday - is low, given that Yahoo! shares traded at $33.63 as recently as Oct 26, 2007.

In addition, they contend that the premium Microsoft is offering is insufficient because Yahoo holds cash and shares in publicly traded companies, including Yahoo Japan Corp. and Alibaba Group Holding Ltd., with a total market value of more than $12 per Yahoo! share, WSJ said. (IANS)

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