Google Inc. Chief Executive Eric Schmidt called Yahoo Inc. CEO Jerry Yang to offer his company's help in any effort to thwart Microsoft Corp.'s unsolicited $44.6 billion bid for Yahoo, say people familiar with the matter.
The approach Friday from Google -- Microsoft's chief rival on the Internet -- came as Yahoo is assessing its options for responding to Microsoft's aggressive "bear hug" bid, which has sent aftershocks through the media and technology industries since its announcement Friday. People familiar with the matter say Yahoo's board of directors, 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.
It's considered unlikely that Google would itself bid for Yahoo because of regulatory concerns related to their large shares of the search and online advertising markets. But the people familiar with the matter say 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, say 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.
A Google spokesman declined to comment on any interest in Yahoo or contact between the two companies. Google in a blog post yesterday 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."
One person familiar with the matter said that 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, said people familiar with the matter.
Yahoo has said its board of directors would weigh the Microsoft offer and any alternatives, including keeping Yahoo independent, "and pursue the best course of action to maximize long-term value for shareholders." In a statement on its Web site, the company said "a review process like this is fluid, and it can take quite a bit of time."
Yahoo already had been in negotiations in recent weeks to outsource its Web-search advertising in Europe to Google, say people familiar with the matter. 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, says one of the people familiar with the matter. Another person said the two sides recently hit a disagreement on the revenue split between them.
Citigroup Global Markets analyst Mark Mahaney in a Friday research note estimated that Yahoo could boost its cash flow more than 25% annually by outsourcing all its search advertising to Google. Yahoo executives had considered such a maneuver as part of a strategic review last year, according to people familiar with the matter, but Mr. Yang in October had signaled that it had decided against it.
"We believe having a principal position in both search and display advertising is critical to creating... long-term shareholder value," Mr. Yang told analysts during Yahoo's earnings conference call in October. Yahoo's recent poor performance, including a sinking share price prior to Microsoft's bid and a tepid 2008 revenue outlook announced Tuesday, heightened calls for bolder moves by Mr. Yang, possibly spurring the change of heart toward Google.
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 per share -- a 62% premium to Yahoo's Thursday 4 p.m. trading on the Nasdaq -- is low, given that Yahoo shares traded at $33.63 as recently as Oct. 26.
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 $12 per Yahoo share. "We've got a very fair offer in front of the Yahoo shareholders," said Steve Ballmer, Microsoft's chief executive, in an interview yesterday.
Google and Microsoft exchanged barbs yesterday related to that issue. Google Senior Vice President David Drummond in a blog post asked whether Microsoft could "now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC."
Microsoft General Counsel Brad Smith responded in a statement that "The combination of Microsoft and Yahoo will create a more competitive marketplace by establishing a compelling No. 2 competitor for Internet search and online advertising." Mr. Smith added that "the alternative scenarios only lead to less competition on the Internet." (Read the statement.)
Google identified instant messaging and Web email accounts as areas where a Microsoft-Yahoo combination would have "an overwhelming" market share. In the blog post, Google also questioned whether Microsoft could use its "PC software monopoly to unfairly limit the ability of consumers to freely access competitors' email, [instant messaging] and Web-based services."
Microsoft had clearly identified competition from Google as a key reason behind its bid for Yahoo. In a letter to Yahoo's board making the offer on Thursday, Mr. Ballmer said the online advertising market is "increasingly dominated by one player," a reference to Google. "Together, Microsoft and Yahoo can offer competitive choice while better fulfilling the needs of customers and partners," he added. The two have been largely unsuccessful in their intensive efforts to narrow the gap with Google in Web-search market share and challenge its growing lead in Internet ad sales.
.... already ruined vista .........
poor M$!
