Google Assails Microsoft Over Yahoo Deal
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
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 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
"Could Microsoft now attempt to exert the same sort of inappropriate and
illegal influence over the Internet that it did with the PC?" Drummond
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
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.