Microsoft's Yahoo bid upsets Google

Internet search leader wants regulators to examine the $42bn takeover proposal.

    Sources say Google CEO Schmidt has called on
    Yahoo to resist the Microsoft bid [GALLO/GETTY]

    Microsoft has been trying to depict a Yahoo takeover as a good for both advertisers and consumers because the two companies together would be able to compete against Google more effectively.
     
    But Google says that Microsoft will be able to stifle innovation by using the dominance of its Windows operating system.
     
    Google suggests Microsoft could set up personal computers to automatically take consumers to online services, such as email and instant messaging, controlled by Microsoft.
     
    Generous offer
     
    Eric Schmidt, Google's CEO, called on his counterpart at Yahoo late last week to offer help in frustrating the bid, according to a report on The Wall Street Journal's website, which cited anonymous sources.
     
    But Brad Smith, Microsoft's general counsel, said that preventing Microsoft from buying Yahoo would undermine competition by allowing Google to become even more dominant than it already is.
     
    "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."
     
    Little choice
     
    If the deal goes through, Microsoft and Yahoo would have about 16 per cent market share of worldwide internet search, still far behind Google's 62 per cent share, according to research company comScore Media Metrix.
     
    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 per cent above Yahoo's market value, a premium analysts say others would be unlikely to beat.

    SOURCE: Agencies


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