FT.com / In depth - Google weighs in against Microsoft

FT.com / In depth - Google weighs in against Microsoft

Google weighs in against Microsoft
By Richard Waters in San Francisco and Andrew Edgecliffe-Johnson in London

Published: February 3 2008 19:54 | Last updated: February 4 2008 03:17

Google raised a red flag over Microsoft’s unsolicited takeover offer for Yahoo, on Sunday arguing it could open the way for the software developer to extend its PC monopoly to the internet.

The intervention is the latest example of the growing enmity between the two companies and echoes Microsoft’s denunciation of Google’s proposed acquisition of online advertising company DoubleClick.

While Microsoft claimed that deal could give Google inordinate power to control online advertisements as they become the lifeblood of many internet companies, Google believes Microsoft would be in a position to influence the evolution of the web itself.

However, Brad Smith, general counsel of Microsoft, said: “Microsoft is committed to ­openness, innovation, and the protection of privacy on the internet.”

Microsoft has not ruled out launching a proxy fight for control of Yahoo by 13 March, the last date it can nominate its own directors to the company’s board ahead of this year’s shareholders’ meeting.

Separately, an alliance with Google is being seen inside Yahoo as one of the main options as the company tries to fight off Microsoft’s unsolicited approach, according to one person familiar with its thinking.

Yahoo rejected the idea of a tie-up with Google last year but has now put it back at the top of its list of options, along with finding ways to realise more of the value from its stakes in Japanese and Chinese joint ventures, according to this person.

The possibility of an alliance between the two internet groups adds to the intrigue surrounding the tussle between Google and Microsoft, and could raise questions about Google’s motivations in publicly attacking Microsoft now.

In a posting on Google’s company blog, David Drummond, its top lawyer, said: “While the internet rewards competitive innovation, Microsoft has frequently sought to establish proprietary monopolies – and then leverage its dominance into new, adjacent markets.”

He went on to question whether a Yahoo acquisition would allow Microsoft, “despite its legacy of serious legal and regulatory offences, to extend unfair practices from browsers and operating systems to the internet”.

Google swung the spotlight on to the “overwhelming” share of the web e-mail and instant messaging markets that Microsoft and Yahoo account for, plus the fact that they own two of the busiest web portals.

“Could a combination of the two take advantage of a PC software monopoly to unfairly limit the ability of consumers to freely access competitors’ e-mail, IM, and web-based services?” Mr Drummond asked.

Meanwhile, a Google-Yahoo alliance, something discussed but not pursued last year, would enable Google to halt Microsoft’s latest bid to boost its standing on the web.

The idea was receiving serious consideration again this weekend as Yahoo looked at a wider range of options, according to a person close to the company.

Microsoft’s cash-and-stock offer for Yahoo was worth $43bn at the end of last week.
Copyright The Financial Times Limited 2008