Yahoo Inc would
consider a business alliance with Google Inc as one way to rebuff a $44.6
billion takeover proposal by Microsoft, a source familiar with Yahoo’s strategy
said.
Yahoo founders David Filo and Jerry Yang
Yahoo management is considering revisiting talks it held with
Google several months ago on an alliance as an alternative to Microsoft’s bid,
source said.
At $31 a share, Yahoo believes the bid undervalues the
company, two sources said.
A second source close to Yahoo said it had
received a procession of preliminary contacts by media, technology, telephone
and financial companies. But the source said that they were unaware whether any
alternative bid was in the offing.
In a memo to Yahoo employees,
which was obtained by Reuters, Yahoo leaders wrote, “We want to emphasize
that absolutely no decisions have been made — and, despite what some people
have tried to suggest, there’s certainly no integration process
underway.”
Few natural bidders exist besides Google that could
engage in a bidding war, and Google would be unlikely to win approval from
antitrust regulators, some Wall Street analysts said.
The Wall Street
Journal reported on its website that Google’s chief executive Eric Schmidt
called Yahoo’s chief executive Jerry Yang to offer his company’s help in any
effort to thwart Microsoft’s bid.
Spokesmen for Yahoo and Google
declined comment. Google was not immediately available for comment on the WSJ
story.
Yahoo’s efforts to find an alternative bidder could simply be
a measure to pressure Microsoft to boost its bid, which valued Yahoo at $44.6
billion when first announced.
Sanford C Bernstein analyst Jeffrey
Lindsay wrote in a research note that “the Microsoft bid of $31 is very
astute” because it puts pressure on Yahoo management to take actions that
could unlock the underlying value of Yahoo assets, which he estimates are worth
upward of $39-$45 a share.
The bid gave a boost to markets in Asia
when they opened on Monday. Shares in Softbank Corp soared as much as 16 per
cent and Yahoo Japan was untraded due to a flood of buy orders on Monday, on
hopes a potential deal between Microsoft and Yahoo would boost the Japanese
firms’ competitiveness.
Softbank holds a 3.9 per cent stake in Yahoo
Inc in terms of voting rights.
The benchmark Nikkei average ended the
morning up 2.4 per cent while indexes in Shanghai, Hong Kong, South Korea,
Taiwan and Singapore also gained.
Separately, Google fired back at Microsoft Corp’s bid to
acquire Yahoo, accusing Microsoft of seeking to extend its computer software
monopoly deeper into the Internet realm.
David Drummond, a Google
chief legal officer, said in a blog post that the combination of Microsoft and
Yahoo could undermine competition on the Web and called on policy makers to
challenge the combination.
Microsoft responded to Google’s arguments
by saying that a merger with Yahoo would create a “compelling number two
competitor for Internet search and online advertising” to market leader
Google.
“The alternative scenarios only lead to less
competition on the Internet,” Microsoft General Counsel Brad Smith said in
a statement.
Drummond argued that Microsoft’s power stems from
decades-old monopolies in Windows — the software operating system used to
control most personal computers — and Internet Explorer, which is the dominant
browser consumers used to view the Web.
Microsoft’s proposed merger
with Yahoo would combine the No. 1 and No. 2 suppliers of Web-based email,
instant messaging (IM) and portals, which act as starting points for hundreds of
millions of users seeking information on the Web.
“Could a
combination of the two take advantage of a PC software monopoly to unfairly
limit the ability of consumers to freely access competitors’ email, IM, and
Web-based services?” Drummond said in a blog.
In making its
case for the deal during a conference call, Microsoft executives said Google –
not Microsoft — was the one company antitrust regulators were likely to bar
from buying Yahoo, based on Google’s dominance in Web
search.
Microsoft executives cited industry data showing Google has a
75 per cent share of worldwide Web search revenue. Collectively, Yahoo and
Microsoft attract around 20 per cent of Web searches, Internet measurement firms
show.
“Today, Google is the dominant search engine and
advertising company on the Web,” Smith said in replying to Google.
“Google has amassed about 75 per cent of paid search revenues worldwide
and its share continues to grow.”
A person familiar with
Google’s thinking said the company believes Microsoft is using the same playbook
it did in the 1990s to switch Windows users away from Web browser pioneer
Netscape Communications to its own Internet Explorer.
“It is
the same old story,” the source said.
Via Times of India