A War of Words Between Web Giants

Not Surprisingly, Google and Microsoft Don't See Eye to Eye Over Latter's Yahoo Bid

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NEW YORK (AdAge.com) -- While Google and Microsoft have been trading barbs over the latter's $44.6 billion bid to acquire internet icon Yahoo -- which is less-than-interested in becoming part of Microsoft -- two potential white knights won't be riding to its rescue.

NBC Universal CEO Jeffrey Zucker and News Corp. CEO Rupert Murdoch, both cited as possible suitors for Yahoo, told analysts yesterday they were not interested in putting in a bid for the beleaguered internet portal.

'Hostile bid'
Meanwhile, over the weekend, the legal teams at headquarters in Mountain View, Calif. (Google), and Redmond, Wash. (Microsoft), were busy firing across each other's bow. On Super Bowl Sunday Google's chief legal officer David Drummond wrote on Google's official blog that "Microsoft's hostile bid for Yahoo raises troubling questions."

He also said the combination constitutes an "overwhelming" share of the web-based e-mail and instant-messaging market and that Microsoft's MSN and Yahoo are two of the world's most heavily trafficked portals. "Can the 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? Policymakers around the world need to ask these questions -- and consumers deserve satisfying answers."

He also brought up Microsoft's past, which is plagued with antitrust concerns: Could Microsoft attempt to exert the same "inappropriate and illegal influence over the internet as it did with the PC?"

That same day, Microsoft's general counsel, Brad Smith, issued what was a clear rebuttal and positioned the combination as "establishing a compelling number two competitor for internet search and online advertising." He noted Google controlled 75% of paid search revenue share worldwide and 65% query share in the U.S. and more than 85% of query share in Europe.

Microsoft's commitment
"Microsoft is committed to openness, innovation and the protection of privacy on the internet," he said in a statement. "We believe that the combination of Microsoft and Yahoo will advance these goals."

Not surprisingly, policymakers jumped on the opportunity to tout their consumer interest. After Microsoft's bid Feb. 1, House Judiciary Committee Chairman John Conyers, Jr. (D-Mich.) and Committee Ranking Republican Lamar Smith (R-Texas) said they would hold a hearing Feb. 8 on the internet's competitive landscape. The hearing will include discussion of the proposed Microsoft-Yahoo merger.

Yahoo tried to assuage its own employees with a letter dated Feb. 1 from CEO Jerry Yang and Board Chair Roy Bostock: "This proposal is just that -- a proposal. And it was only made in the last 24 hours. You can be sure the board is going to review it thoughtfully and carefully and do what's right for our great company. Microsoft's proposal is one of many options that we're evaluating in order to maximize value for our shareholders and employees over the long-term."

They also urged employees not to "let any of the noise we're hearing around this situation distract us from our core mission. It's critical that we continue to focus on running our business, executing our strategy and delivering value to all of our users, advertisers and publishers."
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